IN APRIL: Annual inflation rate slows down, drops to 6.45%

• Cigarette prices rose 6.25% and prices for cooking oil dropped 3.34%

Ana Săbiescu

The annual inflation rate dropped to 6.45% in April, down from 6,71% in March, in line with economists" and the Central Bank"s estimates, as a result of the cut in prices for services and a stagnation of foodstuffs prices, according to data published by the National Statistics Institute.

In April 2009, compared to the previous month, foodstuffs prices remained steady, prices for non-food goods increased by 0.81%, and tariffs for services dropped -0,45%.

Last month"s largest price hikes were recorded for tobacco and cigarettes (6,25%) and vegetables (1.34%). The price of drugs rose 0.47% over March, and fuel prices increased 0.27%.

Conversely, prices dropped for edible oil (3.34%), eggs (3,02%), and potatoes (2,05%). Prices for milk and dairy products dropped slightly, in April (-0,05% ), MOM.

The National Bank feels there are favorable conditions for a quicker disinflation in H2 2009, because the influence of the main inflationary factor - the evolution of the exchange rate - has dwindled.

The National Bank of Romania set its inflation target to 3.% for 2009 and 2010, with an allowed deviation of 1%. Also, the National Bank revised its forecast for the inflation rate at the end of the year 2009, to 4.4% (down from 4,5%) and to 2.8% for 2010 (down from 3.2%). Thus, the inflation has to drop 2.05% to reach the end-of-year target.

The inflation rate is an issue for Romania, especially given Romania"s desire to join the Euro zone. In order to switch to the Euro, Romania has to meet the requirements of the Maastricht treaty, namely, to have its inflation rate match the average of the three most powerful states in the Euro zone with a maximum allowed deviation of 1.5%.