Romanian Deflation Eased More Than Forecast Before New Tax Cuts

  • Prices fell 1.1 percent vs 1.2% drop seen in Bloomberg survey
  • Consumer prices declining on annual basis since June

Romania’s consumer-price decline eased as the impact of a sales-tax cut that triggered the first deflation since Communism faded before a new round of reductions in 2016.

Prices fell 1.1 percent from a year earlier in November after a 1.6 percent decline in October, the National Statistics Institute said Friday in an e-mailed statement. That was less than the 1.2 percent median estimate in a Bloomberg survey of 10 economists. Prices rose 0.3 percent from the previous month.

Monetary-policy makers are dealing with what they call temporary deflation, triggered by tax cuts in the run-up to elections late next year. The central bank kept its main interest rate unchanged for a fourth meeting last month, citing political turbulence after Prime Minister Victor Ponta quit amid protests. The bank sees prices declining until May, and forecasts 2016 inflation of 1.1 percent after deflation of 0.7 percent this year.

“Inflation is likely to hover in negative territory until mid-2016, before climbing toward 1 percent in December 2016,” Dumitru Dulgheru, a Bucharest-based economist at Erste Group Bank AG, said in a note. He sees price growth returning to the central bank’s target range of 1.5 percent to 3.5 percent early the following year.

The leu was little changed at 4.45170 against the euro as of 9:03 a.m. in Bucharest after falling to the lowest since March 2014 on Thursday, according to data compiled by Bloomberg.

Food prices fell 6.2 percent from a year earlier in November, while non-food items increased 1.5 percent and services costs gained 2.3 percent, the institute said.

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