For 2015, the bank estimates an annual inflation of 3.2%, central bank governor Mugur Isarescu said at the presentation of the bank’s quarterly inflation report.
He said the inflation is expected to slow to historical lows of 0.6%-0.7% in the first quarter of 2014 before returning inside the bank’s target range of 1.5%-3.5%.
“The estimated sharp deceleration of the annual inflation will be temporarily and the central bank sees no risks of a deflation,” Isarescu said.
Romania’s annual inflation slowed to a post-communist low of 1.55% in December, from 1.88% a month earlier.
Potential upside risks to the 2014 inflation forecast come mainly from external markets, particularly from capital flow volatility on the back of fluctuating investor appetite and the changes in exposure to the emerging economies, Isarescu said.
He said uncertainties regarding the implementation of Romania’s structural reforms agreed with its foreign creditors during an election year could also have a negative effect on the annual inflation.
The central bank’s chief estimates domestic consumption will advance at a modest pace in 2014, also helped by a slight recovery in lending activity.
The bank Tuesday lowered its main lending rate by a quarter of a point to a record low of 3.5% a year, the sixth consecutive cut since July 2013.
“Adjusted CORE2 inflation (which excludes volatile items and administered prices) fell into negative territory as of September 2013, which allowed us to lower the monetary policy rates even in the context of the financial tensions in the region and of the leu’s depreciation against the euro,” Isarescu said.