Romania: August Inflation Report Summary
Overview:
With inflation falling (although still above target), economic growth very weak and the currency relatively stable, the central bank has been cutting its policy rate regularly in 50bps steps. The August Inflation Report sees a further downward revision to the inflation forecast. Inflation is expected to be right at the bottom of the target band on a two-year horizon. This suggests that the central bank has room to cut rates further. After all, the current 8.5% is relatively high compared to the central point of the inflation target (3.5%) when one considers that growth is well below its medium-term trend. The Monetary Policy Committee will still prefer to move in small steps however in order that it doesn’t destabilize the Leu by cutting the positive interest rate in its favour too quickly.