Romania's central bank, which earlier held its policy rate steady, said the rising trend in inflation had been halted and the economy was slowly recovering amid the euro area recession.
The National Bank of Romania, which held its policy rate steady at 5.25 percent, said the "prospects remain favorable for the annual inflation rate to return inside the target bank by the end of the year, but risks and uncertainties related to the developments in the external environment, capital flows, administered prices and some volatile prices still persist."
The central bank's 2013 target for annual inflation is 2.5 percent, plus/minus one percentage point, and in November the inflation rate fell to 4.56 percent from a September peak of 5.33 percent "thereby confirming the gradual fading of the inflationary effect coming from supply-side factors," the bank said in a statement.
Weak industrial production and retail trade, along with the protracted euro area recession that limits Romanian exports, suggests that the negative output gap will persist, the bank said.
Romania's Gross Domestic Product contracted by 0.5 percent in the third quarter from the second quarter for an annual drop in GDP of 0.6 percent, down from growth of 1.7 percent in the previous quarter.
The central bank's current forecast calls for inflation to decline to 3.5 percent in the 2013 fourth quarter and then continue to slowly fall next year to 3.0 percent in the third quarter of 2014.
Last year the central bank cut its policy rate by 75 basis points and the bank said its policy decisions were "aimed at resuming and consolidating disinflation, whose outlook is further marked by risks and uncertainties related to domestic developments, including the persistence of structural rigidities across the Romanian economy as well as the euro area and global economic recovery."