Central banks across Emerging Europe have responded to slowing economies by cutting interest rates, but Romania's policymakers will have few options when they meet next week primarily because of inflation risks from deregulating power and gas prices, which had been capped below market cost for years to protect consumers, according to Reuters.
As well as freeing up prices, new taxes on energy firms and other measures are also expected to feed into higher prices for goods. The price rises will weigh heavily on Romania's economy, still struggling to recover from two years of recession after a housing bubble burst in 2009, forcing it to seek help from the IMF.
Inflation and political instability prompted the central bank to halt a rate cutting cycle at 5.25 percent in May 2012, a record low for Romania but still among the highest in the EU. Since then, Hungary and Poland have cut borrowing costs and the Czech central bank is threatening to weaken its currency - with rates already near zero - to help a recession-hit economy.
Source: bne