October 11 (SeeNews) - Romania's annual consumer price deflation accelerated to 0.6% in September from 0.2% in August, data from the statistics office, INS, showed on Tuesday.
Food prices were up 0.46% on the year in September, while non-food prices fell 1.06%, INS said in a statement. Prices in the services sector went down 1.17%.
On a month-to-month basis, the consumer price index (CPI) edged down 0.11% in September, with food prices down 0.58%, non-food charges up 0.21% and services costs down 0.01%.
In August, Romania's central bank, BNR, said it sees annual inflation remaining in negative territory longer than previously expected, until the end of 2016. In its previous forecast in May, the bank said it expected deflation to persist until July, a month later than previously envisaged.
BNR now expects end-year deflation of 0.4% for 2016 and 2% inflation at end-2017. Its previous estimates pointed to end-year inflation of 0.6% for 2016 and 2.7% for 2017.
Romania's annual inflation rate turned negative last June after the scope of a 9% cut in VAT rate was expanded to include all food items, non-alcoholic beverages and food service activities.
Romania posted 0.9% deflation at end-2015.
BNR maintained its monetary policy rate at a record low of 1.75% at the end of last month. The bank last changed its monetary policy rate in May 2015, when it cut it by 25 basis points.
In a comment on the latest inflation data, ING Bank analysts said on Tuesday that the figures came in below market consensus of a negative 0.2% and their own call of a negative 0.1%, with the difference coming mostly from food prices - mostly vegetables and fresh fruit.
"All in all, while this reading would entail some downside risks to our year-end inflation call, currently at -0.4%, some upside pressures could come from oil prices in the final part of the year," ING analysts said in a daily comment on financial markets.
Raiffeisen Bank analysts also said that the 0.1% monthly price decline in September undershoot their expectations, as they were expecting prices to rise by 0.1% month-on-month.
"This dynamics in September was driven by the decline of prices of food products. According to our calculations, volatile prices of fruits and vegetables declined by around 3.7% month on month, mainly due to seasonal reasons which failed to materialize during August and July," Raiffeisen Bank analysts said in a daily market report.
"Contrary to our and market consensus estimates, inflation turned negative on the month in September, while annual deflation tightened its grip. In view of today’s reading, and since we are only a few months away from the turn of the year, we have decided to pare back our inflation forecast for December to -0.6%," Erste Group analysts said in their latest CEE country short note.
The unexpected and marked decline in the price of fruit and vegetables triggered an overall monthly fall in prices, they added.
"Elsewhere, we had largely anticipated the inflation, with non-food prices growing a rather modest 0.2% on the month and services coming in almost flat. Fuels were subject to a price increase in September (+0.7% m/m), and it seems that they will continue to put upward pressure on prices in October, as Brent crude oil is likely to consolidate at somewhat higher levels," Erste analysts concluded.
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