Romania’s March 4.9% y/y inflation 0.26pp above central bank’s target
<p>Romania’s headline inflation eased from just above 5% y/y in February to 4.86% y/y in March – in line with expectations but well above the 4.6% y/y target set by the central bank, according to data published by the statistics office INS.</p>

<p>The core inflation increased to 5.3% y/y in March from 5.0% y/y in February – when it reached the lowest level in more than three years.</p>

<p>As of March, food prices were 5.1% higher y/y, while the non-food prices (including energy) lagged behind overall price dynamics with a 3.8% y/y advance. The average price of services was up 7.0% y/y, which was mainly driven by the price of utilities, although the robust rise in household income has also contributed.</p>

<p>Independent analysts and the National Bank of Romania (BNR) trust that subdued private demand will bring inflation down towards the end of the year. BNR projects 3.8% inflation at the end of 2025 and 3.1% one year later.</p>

<p>In a research report, Erste Bank Group forecast 3.5% inflation at the end of 2025 and three 25 base points (bp) rate cuts this year, with the first one in August. However, upward risks for inflation, resulting in fewer rate cuts, are noted.</p>

<p>A 3.5% year-end inflation this year means, however, roughly a 1.5% rise in average prices by the end of the year – or annualised 2.0% inflation. Lower energy prices caused by a global economic slowdown may be conducive to such a deflationary scenario but at the cost of a significant economic slowdown.</p>

<p>Capital Economics, without mentioning specific inflation at the end of the year, in a comment on the recent BNR monetary policy decision, said the BNR might keep the policy rate steady at 6.5% by the end of the year – which points to the uncertainty generating multiple possible scenarios.</p>

<p><em>iulian@romania-insider.com</em></p>

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