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Romania slashes inflation forecast for this year

Staff writer |
Romania’s central bank has cut its inflation forecast for this year by more than half and chopped next year’s prediction sharply.

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This was prompting central bank Governor Mugur Isarescu to say potential changes in monetary policy could see slight delays.

Inflation is now forecast to reach 0.6 percent at end-2016, from a prior 1.4 percent estimate, driven by a cut in household energy prices, a climate of low prices in Europe and potential lower economic growth stemming from a new bill that enables borrowers to walk away from their mortgaged properties.

The central bank expects inflation to reach 2.7 percent at the end of 2017, down from a previous forecast of 3.4 percent.

Romanian consumer prices fell 3 percent on the year in March, but Isarescu said inflationary pressures were building up in the background, as evidenced by consumer confidence, rising production costs and other indicators.

“We see excess of demand, which will show up stating this year, it will have its say and will, of course, define our future behaviour,” Isarescu told a news conference to present the quarterly inflation report.

“Under uncertain conditions, one needs to boost vigilence and ready all intervention instruments to keep price and financial stability.”

Asked whether lower inflation forecasts gave the bank a window of opportunity to further cut minimum reserve requirements, Isarescu said:

“We are not dissociating from our medium-term targets; but there is a possibility they could be slightly delayed or less clear.”

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