The Romanian National Bank (BNR) has revised downwards the inflation forecast for this year, expecting negative consumer price evolutions in the three next quarters, as a result of the fiscal relaxation measures in the new Fiscal Code.

The inflation rate then will turn positive, but will remain below the variation range targeted by BNR, which is between 1.5% and 3.5%, until the beginning of 2017, said Central Bank Governor Mugur Isarescu.

The “disinflationary transitory impact” of the fiscal relaxation measures still mask a series of medium-term inflationary pressures, according to BNR.

In the May report, BNR estimated an inflation rate of 0.2% for this year and of 1.9% for 2016. The annual inflation rate reached -1.6% in June, after the VAT rate cut on food from 24% to 9%.

The new Fiscal Code, which the Parliament will revise at the end of August, includes the general VAT rate cut from 24% to 19%, starting January 2016, which should lead to new price declines.

Under the circumstances and based on currently available data, the board of the National Bank of Romania has decided to keep the monetary policy rate unchanged at 1.75% per year.

Negative inflation rate in Romania after VAT cut on food

editor@romania-insider.com