Romania's consumer prices have advanced by 0.7% in December, driven by the electricity price that increased by 3.9% and contributed nearly 0.3pp alone to the monthly inflation, according to data released by the statistics office INS.

The annual inflation reached 8.2%, and the energy prices in general (electricity, natural gas, heating and fuels included) contributed altogether more than half - 4.3pp, more precisely.

The price of natural gas alone rose by 52% YoY as of December, contributing 1.6pp to the overall inflation, and the price of fuels rose by 22%, contributing nearly 2.0pp.

With an annual increase of less than 15% (partly due to the 'cap and subsidy' scheme), the price of electricity contributed only 0.7pp to the overall 8.2% annual inflation. But the rise of prices has been more general: food prices rose by 6.7%, for instance.

The National Bank of Romania (BNR) at its January monetary board meeting also admitted that the CORE inflation rose more than anticipated: "the annual adjusted CORE2 inflation rate rose somewhat faster than anticipated, up from 3.6% in September to 4.0% in October and 4.3% in November."

The central bank said on January 10 that it expects inflation to be even higher in the short term, compared to its November forecast, amid a stronger rise in electricity and gas prices but also a rise in the price of processed food. The latest forecast shows a peak of 8.6% in the spring after the state facilities for the payment of invoices expire.

Banks expect more rate hikes. Erste Bank sees the refinancing rate at 3% by the middle of the year, while ING estimates that it will reach 3.5% towards the end of the third quarter.

(Photo: Shutterstock)

iulian@romania-insider.com