Romania's annual inflation rate rose to 14.5% in May, up from 13.8% in April, the statistics office INS announced.

This was just above the median of 14.4% set by the Bloomberg survey and below BCR Erste Bank's forecast of 14.7%. The monthly inflation eased to 1.2% m/m in May from 3.7% m/m in April.

The food prices increased in line with the average, by 14.3% y/y, and the prices of the non-food goods (including natural gas, electricity and fuels) advanced faster, by 17.2% y/y. The prices of the services rose by only 7.5% y/y.

In its latest monetary board meeting, on May 10, the National Bank of Romania (BNR) increased the monetary policy interest rate by 75bp to 3.75%, a smaller increase than analysts had expected.

A research note from BCR, coordinated by chief economist Ciprian Dascalu, argued that BNR had coordinated its steps to increase the monetary policy interest rate so that the differential between Romania's key interest rate and that of Poland remains unchanged.

In the current context, "we see the monetary policy interest rate reaching 5.50% at the end of the year and 6.50% for the credit facility, which should remain the relevant operational policy instrument for strict liquidity management. In the medium term, the BNR governor said that he sees the CPI and the key interest rate converging towards 5.0%," Ciprian Dascălu said, quoted by Economica.net.

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iulian@romania-insider.com