Romania's central bank, which earlier today cut its rate by another 25 basis points to 2.50 percent, said inflation in the short run was expected to remain below the lower bound of its target range due to the impact of lower oil prices and the persistent negative output gap.
The National Bank of Romania (NBR), which has now cut its rate by 275 basis points since embarking on an easing cycle in July 2013, added that the rate cut also took place against the backdrop of heightened uncertainty due to regional geopolitical tensions and changes to monetary policy by major central banks worldwide.
But while inflation is expected to remain below the central bank's lower bound of 1.5 percent in the short term, it said the growth of local currency loans to firms and households was picking up and the latest data also showed a recovery of domestic demand due to an improvement in consumption and investment.
Romania's headline inflation rate eased to 1.3 percent in November from 1.4 percent in October, with the average inflation rate dropping to 1.1 percent from 1.2 percent. The NBR targets inflation of 2.5 percent, plus/minus 1 percentage point.
At its next board meeting in February, the central bank will update its inflation forecast.
In November the NBR lowered its 2014 inflation forecast with inflation expected to end 2014 at 1.5 percent and to end 2015 at 2.2 percent, down from the August forecast of 2.2 percent and 3.0 percent.
Romania's Gross Domestic Product expanded by 1.8 percent in the third quarter of 2014 from the second quarter for annual growth of 3.2 percent, up from 1.4 percent.
The National Bank of Romania issued the following statement: