Romania’s Inflation Exceeds 15% In June And is Rising

Consumer prices in Romania reached 4.95% in July, up significantly from 3.8%-3.9% during the month of May-June, according to statistics agency INS. Romania’s headline inflation rose from 14.5% in May to almost 15.1% in June, following 0.8% consumer price rise in June, the statistics office (INS) announced. Romania’s average consumer prices rose 1.8 percent in October alone, driven up by higher energy prices, and annual inflation reached 7.9 percent y/y — a substantial improvement of 1.6 percentage points over September’s 6.3%, and above the consensus expectations, most significantly. In Romania, inflation remains elevated at 5.4% (unchanged since May) and has now exceeded the target range of 3%+-1pp for six consecutive months.

The Romanian national bank expected an expected acceleration in annualized CPI inflation rates through June, facing the pressures from manufacturing costs, which were worsened by the Russian invasion of Ukraine. In May 2022, the Bank of Romania (BNR) increased its inflation forecast for the year by the Bank of Romania, reaching 12.5% at the end of the current fiscal year, while it estimated that inflation would reach 6.7% at the end of the next fiscal year.

While Romania has been incrementally increasing efforts to curb inflation, which is running at the fastest rate in nearly two decades, it has refrained from outsized rate increases like those seen by neighboring countries because of concerns about the economic growth rate in its neighbors. Inflation is expected to stay at double-digit levels at least through the second quarter of next year, according to central bank data.

Decembers inflation was at 8.2 percent, according to the central bank’s data. The year-on-year rate rose from 6.29 percent in September to 7.94 percent in October 2021, then fell back to 7.80 percent in November, under the effects of a cap on electricity prices for households and compensation, so slightly above what was expected in the last two months of Q4.

Looking at the latest developments in consumer prices, Council members noted that the annual inflation rate rose once again above the upper bound of the change band for the target in September 2021, rising to 6.29 percent, which was substantially above the forecast, compared with 5.25 percent in August and 3.94 percent in June.

The annual inflation rate for June 2022, as compared with June 2021, calculated from the Harmonized Index of Consumer Prices (HICP), was 13.0 percent. The index of the harmonized index of consumer prices–the measure used for determining the level of inflation across the member states of the European Union–was 100.78 percent in June 2022 compared with May 2022. The national consumer price index (CPI) rose 8.5% over the 12 months ending in March 2022 (compared with an annual inflation rate of 7.9% the previous month).

Notably, the annual inflation rate is expected to continue its sharp upward trend through the middle of 2022 — climbing as high as 7.5 % in December 2021 and as high as 8.6 % in June 2022, far higher than previously projected values of 5.6 and 4.2 percent, respectively. Based on the current assessments, the annual inflation rate is likely to gradually increase over the coming months, influenced by supply-side shocks, exceeding the values shown for this time frame in the medium-term outlook from last November.

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