Friday, November 4, 2016

Romania holds rate, sees inflation in target mid-2017

   Romania's central bank left its monetary policy rate at 1.75 percent and said its latest inflation report affirms that inflation is expected to remain in negative territory until December before rising to within the target range by mid-2017 and settling in the upper end of this range.
    The National Bank of Romania (NBR), which has maintained its rate since May 2015, said this upward trajectory reflects the easing impact of a cut in Value-Added-Tax rates, the dissipating influence of global disinflationary shocks, and inflationary pressures from the gradual increase in aggregate demand and labor costs.
    The NBR will unveil its latest quarterly inflation report on Nov. 10.
    Romania's inflation rate was slightly below forecast of minus 0.6 percent in September compared with minus 0.2 percent in August. The average rate this year was minus 1.7 percent.
    Excluding the impact of the VAT rate cut, the annual inflation rate would have been 0.8 percent, the  central bank said.
    The NBR targets inflation of 2.5 percent, plus/minus 1 percentage point.
    While inflation remains negative, Romania's economy is accelerating, with Gross Domestic Product in the second quarter expanding by an annual rate of 6.0 percent, up from 4.3 percent in the first quarter, due to higher household consumption and capital formation.
    The negative contribution of exports to GDP, however, rose, the central bank said.
   It added that recent data show slowing retail growth in the first month of the third quarter but accelerating growth of manufacturing.
    Last month Liviu Voinea, deputy governor of the central bank, said in an interview in Washington the central bank expects GDP to grow by 5 percent this year but the consumer-led expansion isn't showing signs of overheating.


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