A significant reason for the growth was the elimination of the cap on electricity prices, so they went up by almost 62% month over month.
BCR and Erste had previously forecast 6.9% inflation year-over-year in July, taking into account 30% increase in electricity price month-over-month. Adjusted CORE2 inflation (headline inflation minus administered prices, volatile prices, tobacco and alcohol), which is closely watched by Romania’s central bank, accelerated in July to 5.8% year-on-year from 5.7% in June.
As a result, Erste has revised its year-end inflation forecast from 7.5% to 8.8% and expects it to peak at 9.2% likely in August.
“Next month the VAT and excise duty hikes kick in and inflation is expected to further accelerate. We see the peak on inflation currently for this year at 9.2% year-on-year, which will likely be in August.”
Erste keeps unchanged the CPI forecast for end-2026 at 3.7% and expects inflation to sharply decelerate once July and August shocks are out of the base. Some risks to its call could come from the elimination of the natural gas prices cap, which is due starting from April 2026.
Erste analysts see the key rate ending 2025 at 6.50% and do not expect rate cuts until there will be more clarity on the inflation outlook and a high degree of confidence that inflation would reach the target range over the policy horizon. This is unlikely to happen earlier than the February 2026 Inflation Report, when they see possible the first cut after a long pause.
In monthly terms, consumer prices went up by 2.68% in July. Food prices increased by 0.39% month-over-month with a broad-based growth profile. Prices of non-food items inched up by 5.06% month-over-month mainly due to the electricity prices going up by 61.57% month-over-month. Services prices rose by 1.01% month-over-month with a broad-based growth profile.
(English version by Loredana Fratila-Cristescu)