Wires

INSTANT VIEW 3-Romania inflation accelerates in Sept, industry falls

BUCHAREST, Oct 10 (Reuters) - Romania's annual inflationjumped to 5.3 percent on the year in September, above thecentral bank's target and reducing its scope to cut interestrates to help a languishing economy.

Central banks elsewhere in eastern Europe are in easing modeas market rallies driven by U.S. and European stimulus leavethem more scope to tackle disappointing domestic demand.

But a Romanian easing cycle stopped in May after fourconsecutive quarter point cuts, as the start of a bitterpolitical crisis heightened uncertainty and sent the leucurrency to record lows. Analysts expect rates to stay on holdat 5.25 percent well into next year.

Inflation quickened from August's 3.9 percentdue to a poor harvest, weak currency and energy price hikes andmost analysts expect it to remain higher than the central bank'stargeted 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 tradedeficit widened 4 percent to 6.3 billion euros onthe year in the first eight months.

MARKET REACTION

The Romanian leu was a touch higher after the dataand was bid at 4.5 65 per euro, u p 0 .2 percent on the day.

MARKET FORECAST

A median forecast of 14 analysts polled by Reuters earlierthis 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: FLORENTINA COZMANCA, SENIOR ECONOMIST AT RBS ROMANIA

"Inflation surprised again in September, posing a monthlyrate of 1.2 percent - more than two times higher than we and themarket had expected."

"The main driver of this high inflation were food pricesthat rose by 2.3 percent month-on-month, this being the highestmonthly increase since January 2003. The increase of food pricesgenerated 0.84 percentage points of the total inflation of 1.2percent."

"Although inflation surprised the market, I continue tobelieve that the central bank with not react to the supply shockby raising the key rate."

"Instead, it will keep its prudent stance and maintain thekey rate at the current level."

GEORGIANA CONSTANTINESCU, ECONOMIST, CREDIT EUROPE BANK

"Inflation surprised on the upside and the monthly dynamicsis significant. The impact mainly comes from imports, but alsofrom a weaker food and vegetables output."

"The evolution of the exchange rate and hikes in utilityprices can be seen in food prices. Since we might see otherhikes in such prices, inflation could be over 4.5 percent at theend of the year."

"As in July, the evolution of August industrial output canbe attributed to seasonal factors."

"Exports' dynamics is of a smaller magnitude than that ofimports. If the trend persists we will see a rise in tradedeficit, which is not good news."

"I expect economic growth to be around 1 percent this year,depending on farming data and the evolution of industrial outputin the fourth quarter."

TRADER WITH A FOREIGN BANK IN BUCHAREST

"So, we now see negative real interest rates ... this isnegative for the leu, this is negative for the bonds. I do notexpect a rate hike before the December parliament election."

"Plus industrial production contraction is very negative forthe leu so the central bank now has a dilemma: low growth if any... and high inflation."

VLAD MUSCALU, ECONOMIST AT ING BANK IN BUCHAREST

"It seems that we underestimated the inflation pick up. Itis probable to see inflation at around 6 percent at the end ofthe 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 of2013."

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(Reporting by Ioana Patran and Radu Marinas; Editing by SamCage)

((sam.cage@thomsonreuters.com)(+40)(0)(21 305 5266)(ReutersMessaging: sam.cage.thomsonreuters.com@reuters.net))

Keywords: ROMANIA ECONOMY