(Bloomberg) -- Romania’s central bank may need more time before delivering the first reduction in borrowing costs in more than three years as inflation isn’t slowing as fast as expected and risks remain elevated, Board Member Cristian Popa said. 

Policymakers in Bucharest, who have now kept the benchmark rate at 7% for more than a year, signaled in February that they would likely join regional peers in easing monetary policy as early as May. However, the central bank’s latest statement showed that price growth will likely decline slower than previously expected this year. 

“We need at least two consecutive months of substantial progress on the disinflation front before potentially starting easing — March showed good progress, February didn’t,” Popa said in a phone interview late on Monday. “At this moment, it is not at all clear whether the conditions will allow the start of the normalization process in May.” 

Romania’s inflation rate declined to 6.6% from a year earlier in March, compared with 7.2% in February. That was just above the 6.5% estimate of the central bank for the first quarter and remains one of the highest in the European Union.

Price growth is expected to ease to 4.7% at the end of this year, according to bank’s latest forecast, but policymakers have repeatedly warned that domestic political and fiscal risks combined with geopolitical uncertainties still cloud the outlook. 

Prime Minister Marcel Ciolacu’s government has been struggling to reduce the budget deficit, which is expected to reach 5% of economic output in 2024 and it may take years of work to bring it into line with EU guidelines. The country also faces four rounds of elections this year and growing demands for higher wages and pensions.

“Fiscal policy, income policy and labor market developments raise important challenges ahead,” Popa said. 

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