Romanian consumer prices declined more than expected as higher natural gas tariffs failed to offset a sales-tax cut that had prompted the first negative inflation rate since communism collapsed.
Prices dropped 1.7 per cent from a year earlier in July after June’s 1.6 per cent fall, the National Statistics Institute said Tuesday. That exceeds the 1.3 per cent decrease seen in a Bloomberg survey of eight economists. Prices fell 0.2 per cent from the previous month.
The European Union’s second-poorest member is enduring what the central bank calls a period of “temporary deflation” after the government cut the value-added tax for food and revealed plans to expand fiscal loosening next year. That prompted policy makers to trim their inflation forecast for this year to minus 0.3 per cent and lower interest rates to a record.
"Inflation is projected to stay in negative territory for a long time,” Zoltan Arokszallasi, a Budapest-based economist at Erste Group Bank AG, said in an e-mailed note.
Food prices sank 7.3 per cent from a year earlier, while non-food items advanced 1.3 per cent and services costs rose 2.2 per cent, the institute said.
News by Bloomberg, edited by ESM
