Deflation blow hits Romania hard in Jan

Bloomberg

Romania’s first bout of deflation in more than 25 years worsened in January after a new round of tax cuts came into force, but the decline in prices was less than expected. Prices fell 2.1 percent from a year earlier after a 0.9 percent decline in December, the National Statistics Institute said on Monday in an e-mailed statement. The median estimate in a Bloomberg survey of 11 economists predicted a 2.7 percent drop. Prices fell 0.8 percent from the previous month.
Monetary-policy makers in the European Union’s second- poorest country see the first deflation since communism abating mid-year as the economy expands at one of the continent’s fastest clips. The central bank, which sees the price declines as the temporary result of sales-tax cuts, held the benchmark rate at a record-low 1.75 percent on Feb. 5, leaving borrowing costs untouched for a sixth meeting.
The leu has gained 1 percent against the euro this year, the second-best performance among 24 emerging-market currencies tracked by Bloomberg. It was little changed at 4.4747 per euro before inflation data ware released.
Food prices fell 6.3 percent from a year earlier in January, while non-food items rose 0.1 percent and services costs increased 1.2 percent, the institute said.