(Bloomberg) -- Romania’s inflation rate resumed its decline in August, raising the odds that the central bank will continue cutting interest rates before the elections later this year.
Consumer prices rose at an annual rate of 5.1% last month compared with 5.4% in July, the statistics office in Bucharest said Wednesday. That’s slightly above the 5% median estimate in a Bloomberg survey of economists. Prices rose 0.2% from the previous month.
The central bank reduced interest rates for a second meeting in August, citing a “significant improvement” in the near-term outlook for price growth. While Governor Mugur Isarescu said more easing would depend on the incoming data, policymakers also cut their inflation forecast for this year to 4% from a previous estimate of 4.9%.
The central bank isn’t due to discuss borrowing costs again until October and will then meet in early November, just weeks before Romania holds parliamentary elections and two rounds of voting to pick the next president.
Prime Minister Marcel Ciolacu’s administration has sought to balance demands for higher wages during the campaign with a growing pressure from the European Union to rein in the budget deficit. The shortfall is expected to reach almost 7% of gross domestic product this year.
“We expect inflation to remain outside the target range in 2024 and 2025 because of higher taxes, energy and food prices, with a return inside the target range possible only in 2026,” said Dan Bucsa, a London-based economist at UniCredit.
--With assistance from Harumi Ichikura.
©2024 Bloomberg L.P.
