Romania’s above-expectations 5% y/y February inflation questions yearend target, rate cut plans
<p>The headline inflation in Romania edged marginally above 5% y/y in February from 4.95% y/y in January, but well above the 4.7% y/y market consensus and probably also above the central bank’s expectations – thus putting into question the monetary authority’s (recently revised) 3.8% y/y inflation forecast.</p>

<p>The monthly inflation remained at an elevated rate in February (+0.9% m/m) amid a 1.1% rise in non-food prices and a 0.7% rise in food prices and services fees.</p>

<p>CORE2 inflation decelerated marginally in February at 5.0% y/y from 5.1% previously, remaining 0.2 percentage points above the central bank’s 4.8% forecast for end-Q1.</p>

<p>This price overshoot in February was primarily driven by higher-than-anticipated natural gas prices, which rose 9.1% m/m in the month, Erste Research analysts explain the discrepancy between their expectations and the actual inflation.&nbsp;</p>

<p>Erste analysts expected only a 5.0% m/m gas price rise in February, but higher-than-expected consumption put the average prices up. The regulated natural gas price returned in February 2025 at the same level as it was in February 2024.</p>

<p>Erste analysts believe that February inflation came as a negative surprise for the central bank as well, making it feel less inclined to cut interest rates this year.&nbsp;</p>

<p>“We continue to believe that the first rate cut of 25bp will be at the August meeting, but the 5.75% terminal rate for this year might be at risk of ending higher,” the Erste Research report reads.</p>

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

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