The inflation prognosis for Romania is down by 0.3 percentage points, to 3.2 percent for this year, according to the most recent estimate from the country's Central Bank (BNR). The estimation was also changed for the end of 2014, with an expected inflation of 3.3 percent, instead of 3.2 percent as earlier predicted, according to BNR governor Mugur Isarescu.

The previous inflation prediction for 2013 came in February, and the reduction in the outlook came as there was no information pointing to changes in managed prices. The forecast took into account improvements on two major product groups, fuel and products with volatile prices, with the latter having a reducing effect, Isarescu explained.

Romania will enter a period of key interest rate reduction starting from the next monetary policy meeting of the country's Central Bank BNR board, which will be held at the beginning of July, according to BNR governor Mugur Isarescu. This is a first coming from the BNR, which usually does not announce when it plans to cut or increase the key interest rate, In its most recent board meeting on Thursday (May 2), the BNR decided to keep the interest rate at 5.25 percent. Romania currently has the highest key interest rate in the EU. The last cut in the country's key interest rate was in March, from 5.5 to 5.25 percent, after a similar move in February.

The decision to start decreasing the key interest rate earlier than anticipated – which was originally for the second half of the year – was made after inflation dropped faster than expected, with historical minimum rates in February, March, and a similar evolution in April.

The increase in consumer prices in Romania slowed down in February, at some 0.34 percent month-on-month increase, compared to a 1.34 percent increase in prices in January. Meanwhile, the annual inflation rate went down from 5.97 percent, which was a maximum for the last 18 months, to 5.65 percent.

editor@romania-insider.com