Consumer prices rose by another 1.3% in September, reaching 15.9% YoY - compared to 15.1% YoY projected by the National Bank of Romania (BNR).

Already higher than the central bank's projections in August, the inflation remains above the trajectory sketched by BNR under the latest Inflation Forecast. BNR projects 13.9% YoY inflation for the yearend, but the International Monetary Fund (IMF) recently suggested a significantly higher value (14.7% YoY).

As regards the headline inflation in September, one-third (5.7pp) was caused by the higher energy (fuel, electricity, gas and heating), but the 19.2% higher food goods, on average, contributed as well (+6.3pp). Indeed, the sharpest rise was posted by the price of electricity (+70% YoY as of September), but the price of vegetable oil (+47% YoY) or wheat flour (+34% YoY) also increased abruptly.

"According to current assessments, the annual inflation rate will probably continue to increase towards the end of the current year, under the impact of shocks on the supply side, but at a noticeably slower pace," according to the note sent by BNR along with the monetary policy decision on October 5: a 75bp hike, more than expected by analysts, based precisely on higher-than-anticipated August inflation.

IMF has encouraged the Romanian monetary authority to conduct more hawkish policy, and the game doesn't seem to be over with the latest 75bp hike.

iulian@romania-insider.com

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