Deflation Tightens Its Grip on Romania

First, read this excerpt from a Dec. 17, 2013 Economist article:

[Romania's] economic growth is at 4.1%. Wages are rising fast. Adjusting for prices, Bucharest’s GDP per capita is above the EU average. Indeed, the average Bucharest resident is comfortably better off than the average resident of Manchester, [England].

Now, Romania is grappling with deflation for the first time since communism ended in 1989, and deflation has stretched for five-straight months.

Here's an excerpt from a June 10 Bloomberg article:

Consumer prices [in Romania] fell 3.5 percent in May from a year earlier after declining 3.3 percent in April... That matches the median of 12 estimates in a Bloomberg survey. Prices rose 0.3 percent from the previous month as the effect of a sales tax cut for food in June 2015 starts to fade.
The central bank says tumbling prices are the temporary result of pre-election tax cuts and predicts inflation will return in July. Lower energy tariffs are compounding the downward pressure, prompting the bank last month to trim its 2016 inflation forecast. It left its benchmark interest rate at a record-low 1.75 percent on May 5.
'Low import prices may prevent headline inflation from exceeding targets significantly in 2017,' said... a London-based economist at UniCredit Bank AG. 'As a result, the central bank may remain more dovish than the business cycle would require.'

You can read the entire article by following the link below: