Romania’s central bank targets inflation at 2.5% a year, with a variation band of one percentage point. At the previous inflation report in February, the central bank raised its year-end inflation forecast for 2019 to 3% from a previous forecast of 2.9%. It is expected to raise it further, after the annual rate grew to a higher than expected 4.1% in April.
The central bank will present its new inflation forecast on Friday.
The annual CPI inflation rate went up from 3.83% in February to 4.03% in March and 4.11% in April, thus standing above the variation band of the target and above the forecast. Behind this evolution stood the pick-up in the prices of vegetables and fruit, as well as the advance in fuel prices and tobacco product prices, yet core inflation also made a significant contribution.
The uncertainties and risks surrounding the inflation outlook further relate to the impact of the set of fiscal and budgetary measures implemented this year, including that of the bank asset tax and of the new benchmark index for consumer loans (IRCC) on lending and on the monetary policy transmission mechanism, the central bank said.
Significant uncertainties and risks stem from the fiscal and income policy stance and labor market conditions. The evolution of the current account deficit remains a matter of concern as well.
Also important are the uncertainties about the pace of euro area and global economic growth, the international oil price developments, the monetary policy stances of the ECB and of the Fed, as well as of central banks in the region.
The central bank on Wednesday decided to keep the monetary policy rate at 2.5% a year, while tightening control over money market liquidity. It also kept rates for its deposit and lending facilities unchanged at 1.5% and 3.5%, respectively, and left minimum reserve requirements on foreign currency liabilities and for leu deposits unchanged at 8%.