BUCHAREST, Oct 10 (Reuters) - Romania's annual inflation jumped to 5.3 percent on the year in September, above the central bank's target and reducing its scope to cut interest rates to help a languishing economy.
Central banks elsewhere in eastern Europe are in easing mode as market rallies driven by U.S. and European stimulus leave them more scope to tackle disappointing domestic demand.
But a Romanian easing cycle stopped in May after four consecutive quarter point cuts, as the start of a bitter political crisis heightened uncertainty and sent the leu currency to record lows. Analysts expect rates to stay on hold at 5.25 percent well into next year.
Inflation quickened from August's 3.9 percent due to a poor harvest, weak currency and energy price hikes and most analysts expect it to remain higher than the central bank's targeted band of 2-4 percent at the end of this year.
Other data showed Romania's adjusted industrial output
fell 1.1 percent on the month in August and the trade deficit widened 4 percent to 6.3 billion euros on the year in the first eight months.
MARKET REACTION
The Romanian leu was largely unmoved by the data trading at 4.571, 0.1 percent higher on the day.
MARKET FORECAST
A median forecast of 14 analysts polled by Reuters earlier this month expected annual inflation at 4.7 percent in August, and a 0.5 percent advance on the month.
KEY FIGURES CPI (pct change) SEPT AUG yr/yr 5.3 3.9 mth/mth 1.2 0.5 INDUSTRIAL OUTPUT AUG JULY change mth/mth (pct) -1.1 1.1 change yr/yr (pct) -1.1 1.9 TRADE DEFICIT JAN-AUG JAN-JULY bln euros 6.307 5.327 pct change (yr/yr) 4.0 0.8 IMPORTS (bln euros) 35.960 31.417 EXPORTS (bln euros) 29.653 26.090 ANALYST COMMENTS: VLAD MUSCALU, ECONOMIST AT ING BANK IN BUCHAREST
"It seems that we underestimated the inflation pick up. It is probable to see inflation at around 6 percent at the end of the year. Rate hikes now become more probable again but, maybe, there won't be aggressive moves."
"The first rate hike will probaly be in the first quarter of 2013."
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(Reporting by Ioana Patran and Radu Marinas; Editing by Sam Cage)
((sam.cage@thomsonreuters.com)(+40)(0)(21 305 5266)(Reuters Messaging: sam.cage.thomsonreuters.com@reuters.net))
Keywords: ROMANIA ECONOMY