Romania's central bank ups yearend inflation forecast by 1.5pp to 5.6%

10 August 2021

The consumer prices will increase by a combined 9.2% in 2021-2022, 2pp more than previously estimated, according to the revised inflation forecast published by the National Bank of Romania (BNR) on August 9.

The bulk of the revision was operated for the first part of the period when the annual inflation is expected to hit 5.6% as of December compared to 4.1% under the previous projection drafted in May.

In 2022, the annual inflation is seen as easing to 3.4%, a more moderate 0.4pp upward revision compared to May 2021 forecast.

Inflation already hit 5% in June, BNR governor Mugur Isarescu hinted (data will be released this week), blaming the energy prices and adding that all the central bank can do is prevent the second-round effects, meaning the pass-through of energy prices into the regulated prices.

"You can't fight the energy prices with interest rates," governor Isarescu stated, quoted by Profit.ro.

The day before, BNR maintained the refinancing rate at 1.25% - the lowest level ever, citing "elevated uncertainty" mainly related to fiscal policy.

The latest data published by the National Institute of Statistics (INS) indicates annual inflation of 3.94% in June, compared to 3.75% in May.

"The forecast does not look very good. After this peak, which is already in place[5% in June], we expect the rise of the prices to moderate. Our effort is to keep the annual inflation at 5-5.5% by the end of the year because from January it will drop to 4.5%, due to the base effect. The price increases in autumn will not be very big," commented Isarescu.

As regards the possible tightening of the monetary policy, nothing is clear. "Let's see what happens in the world. We are very dependent on what is happening in the world," said the central bank's governor.

(Photo: George Calin/ Inquam Photos)

iulian@romania-insider.com

Normal

Romania's central bank ups yearend inflation forecast by 1.5pp to 5.6%

10 August 2021

The consumer prices will increase by a combined 9.2% in 2021-2022, 2pp more than previously estimated, according to the revised inflation forecast published by the National Bank of Romania (BNR) on August 9.

The bulk of the revision was operated for the first part of the period when the annual inflation is expected to hit 5.6% as of December compared to 4.1% under the previous projection drafted in May.

In 2022, the annual inflation is seen as easing to 3.4%, a more moderate 0.4pp upward revision compared to May 2021 forecast.

Inflation already hit 5% in June, BNR governor Mugur Isarescu hinted (data will be released this week), blaming the energy prices and adding that all the central bank can do is prevent the second-round effects, meaning the pass-through of energy prices into the regulated prices.

"You can't fight the energy prices with interest rates," governor Isarescu stated, quoted by Profit.ro.

The day before, BNR maintained the refinancing rate at 1.25% - the lowest level ever, citing "elevated uncertainty" mainly related to fiscal policy.

The latest data published by the National Institute of Statistics (INS) indicates annual inflation of 3.94% in June, compared to 3.75% in May.

"The forecast does not look very good. After this peak, which is already in place[5% in June], we expect the rise of the prices to moderate. Our effort is to keep the annual inflation at 5-5.5% by the end of the year because from January it will drop to 4.5%, due to the base effect. The price increases in autumn will not be very big," commented Isarescu.

As regards the possible tightening of the monetary policy, nothing is clear. "Let's see what happens in the world. We are very dependent on what is happening in the world," said the central bank's governor.

(Photo: George Calin/ Inquam Photos)

iulian@romania-insider.com

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