Romania hikes rates, inflation threatens region

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Romania hikes rates, inflation threatens region

Romania's central bank hiked rates on Tuesday to counter a surge in inflation, and analysts say it may soon be followed by other policymakers in central and Eastern Europe as they face a common threat, finance.cz reported.

But in a sign the euro zone slowdown is dragging on emerging Europe, Czech data showed the biggest fall in exports since 2002 in March and a big contraction in imports.

Romania raised its benchmark rate 25 basis points to 9.75 percent, expected by a small minority of analysts in a Reuters poll. That came despite comments from policymakers that rates were at adequate levels to bring down inflation.

That move came hot on the heels of the Hungarian central bank's quarter point hike to 8.25 percent last week and a pledge that it was ready to hike again to fight inflation.

"The bigger picture here is while central banks in the West are cutting interest rates... central banks further east are all hiking, albeit for different reasons," said economist Neil Shearing from Capital Economics in London.

The Bank of England is set to trim rates again in the next few months, possibly as soon as Thursday, while the U.S. Fed has slashed rates by 3.25 percentage point since September.

But in the euro zone, inflation is well above target and the European Central Bank is expected to keep rates at 4 percent on Thursday for the 11th successive month.

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