UPDATE 1-Romanian inflation halves in September on bread tax cut
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BUCHAREST Oct 10 (Reuters) - Romania's annual inflation fell sharply in September to the lower end of the central bank's target range due to tax-driven falls in bread prices, but analysts said the change was unlikely to trigger steeper cuts in interest rates.
Data showed price growth fell to 1.9 percent on the year from August's 3.7 percent, below a 2.6 percent consensus and within the 1.5-3.5 percent target inflation corridor.
Bread prices were down about 12 percent on the month after the government cut value-added tax for bakery products to 9 percent from 24 percent.
The bank has cut interest rates three times this year by a total of 100 basis points to a record low of 4.25 percent and analysts polled by Reuters expect one more 25 basis point cut this year.
"Inflation is now bound to descend below 2.5 percent by the end of the year," said Mihai Patrulescu, senior economist at Unicredit.
"However, the central bank has traditionally discounted these types of exogenous shocks when setting monetary policy and, consequently, we believe the bank will stop short of cutting the reference rate below 4 percent in 2013."
The central bank forecasts monthly inflation to fall to 3.1 percent year-on-year by the end of 2013.
Data showed consumer prices were down 0.6 percent on the month in September. Food prices fell 1.8 percent, while non-food prices were flat. Services edged up 0.4 percent. (Reporting by Ioana Patran; Editing by Radu Marinas and Patrick Graham)