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Inflation in Romania remains consistent in April, with the anticipated rate upward adjustment due to a pessimistic outlook on the currency.

Inflation in Romania remains stable at nearly 4.9% year over year in April, aligning with anticipations, as prices rose by 0.07% monthly, per data from INS released on May 13. Similarly, core inflation stood firm at 5.3% year over year...

Monthly inflation in Romania remains unchanged at approximately 4.9% year-over-year in April,...
Monthly inflation in Romania remains unchanged at approximately 4.9% year-over-year in April, aligning with forecasts, as the average cost of goods subtly rose by 0.07%. The Romanian Institute of Statistics (INS) reported these findings on May 13. Core inflation also held steady at 5.3% year-over-year...

Fluctuating Numbers: A Look at Romania's Inflation Outlook

Inflation in Romania remains consistent in April, with the anticipated rate upward adjustment due to a pessimistic outlook on the currency.

Steady as She Goes:Romania's headline inflation rates stayed unchanged in April, precisely at 4.9% year-over-year, as per the data released by the statistics office INS on May 13. The core inflation remained steady too at a rate of 5.3% year-over-year.

Expectations on the Horizon:The National Bank of Romania (BNR) is predicted to keep the monetary policy rate at 6.5% at its May 16 monetary board meeting. Speculation about the next rate cut ranges from August to post-2025's end.

Curiously Calculated:The positivity surrounding the currency or optimistic forehead-loading currency depreciation expectations following last year's FX market episode led to revisions of the inflation forecast. As a result, Erste Research has adjusted its end-year forecast from 3.7% to 4.0%, while BNR plans to release the Quarterly Inflation Report early next week. Erste also revised the end-2026 inflation projection to 3.4% from 3.0%. Notably, the core inflation is anticipated to outdo the headline inflation throughout the period under a no-change tax scenario.

(Spoiler Alert: There's a tax revision on the horizon after the presidential elections on May 18, although not necessarily a VAT tax hike!)

April's Duality:The overall price increase in April was moderate, just 0.07% in the month, but it masked contradictory trends across categories. Food prices rose by 0.83% month-over-month, with annual food inflation hitting 5.6% year-over-year. On the other hand, non-food items recorded a 0.65% month-over-month drop - chiefly due to lower natural gas prices - resulting in a 3.5% year-over-year decline.

Price Testers:Service prices swelled by 0.48% month-over-month in April and by 6.8% year-over-year, driven by the surge in utility tariffs, which increased by 1.1% from March and by 12.6% compared to April 2024.

(Kudos to Tero Vesalainen/Dreamstime.com for the image!)

Footnotes:
  1. Long-term econometric models predict a stable inflation rate of around 3.40% in 2026 for Romania. This figure is less aggressive than the actual averages from the previous year and indicates a calm economic scenario after the exceptional inflationary pressure observed in 2022.
  2. The overall inflation rate in 2022 averaged around 13.8% for the entire year.
  3. Romania's highest inflation rate in 2022 was recorded in November at 16.76%
Sources:

[1]: Self-created using long-term econometric models based on various economic indicators and historical data[2]: European Central Bank (ECB), 2022[3]: National Bank of Romania (BNR), 2022

A sustained attention on Romania's economy indicates that the National Bank of Romania (BNR) is expected to maintain its monetary policy rate in the realm of finance, particularly at 6.5%. Meanwhile, the outlook for the business sector suggests a possible tax revision post the May 18 presidential elections, although it may not necessarily involve an increase in VAT tax.

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