Romania’s annual inflation rate continues its upward trend, climbing to 8.4% in January, from 8.2% in the prior month, data from the National Statistics Institute (INS) showed Monday (Feb. 14).
This was the highest reading since May 2011, with upward price pressures coming from all components: food products surged by 7.24%, non-food products soared 10.18% and services went up 5.66%.
On a monthly basis, consumer prices advanced 1.5% in January, from December 2021. The average consumer price rate over the last 12 months (January 2022-February 2021) as compared to the previous 12 months (January 2021-February 2020) is 5.5%, INS said.
In its latest Inflation Report, published on Friday (Feb. 11) the National Bank of Romania (BNR) said the annual Consumer Prices Index (CPI) inflation rate is projected at 9.6% in December 2022 compared with December 2021, peaking in April (11.2%), once the current support measures for household consumers of electricity and natural gas end.
“After the release of the November 2021 Inflation Report, a number of considerable upward risks to inflation materialised, mostly related to consumer basket components the prices of which are beyond the scope of monetary policy, in particular energy (fuels, natural gas and electricity). In fact, large upward revisions of the CPI inflation forecast were performed in most countries, including the euro area and particularly Central and East European economies, where, similarly to Romania, very high levels of the indicator in terms of historical values are expected” BNR said.
Policymakers expect inflation to subdue quickly and enter the target band at the end of 2023.
“The path of inflation will remain high until the end of 2023 Q3, before re-entering the variation band of the target a quarter later; at end-2023, the measure is envisaged to run at 3.2 percent. Compared to the previous Inflation Report, the new forecast stands 3.7 percentage points higher for December 2022, of which 3.5 percentage points are ascribed to energy prices, which are beyond the scope of monetary policy.
Other risks to the outlook included commodity price developments, the crisis in Ukraine, domestic fiscal consolidation efforts, as well as persistent bottlenecks in production and supply chains, the BNR said.
Valentin Tataru, ING chief economist Romania, does not foresee headline inflation re-entering the BNR’s target range of 1.5%-3.5% before mid-2024.
Last week, the BNR raised its benchmark interest rate by 50 bps to 2.5% at its February meeting, above expectations.
That rate remains the lowest among regional peers, which have tightened borrowing costs aggressively to rein in prices.
Meanwhile, the European Central Bank last week warned that inflation risks were now tilted to the “upside”, suggesting that price growth in the bloc could remain above target even in 2023.
