“We continue to anticipate a sharp deceleration over the summer, once the indirect tax hikes and the liberalization of electricity prices drop out of the statistical base. Our baseline assumes that the oil price shock will prove transitory, with Brent expected to ease visibly in second half of the year. However, if the shock turns out to be more persistent, it could push our end-2026 inflation forecast higher,” Erste says in a report.
A 10% increase in oil prices adds roughly 0.4% to yearend inflation, Erste analysts say.
The government has recently introduced measures to cushion the fuel price shock for households. As a result, the direct impact on consumer prices should remain relatively contained.
Romania’s National Statistics Institute on Tuesday announced an annual inflation rate of 9.9% in March, an increase on the 9.3% rate in February.
Erste sees monetary policy rate hikes highly unlikely, though tighter liquidity management might be prompted by bouts of FX depreciation pressures, as the effective rate is currently at the deposit facility level of 5.50%.
“With the short-term inflation profile shifted upwards, we expect NBR (Romania’s central bank i.e.) to consider eventual rate cuts the earliest at the last meeting of the year scheduled for November, which is accompanied by an updated forecast. Apart for better assessment on the amplitude of the energy shock and effectiveness of the offsetting measures adopted by the government, the NBR is likely to watch the European Central Bank’s moves and expectations.”
Erste revised its forecast for the performance of the economies in Central and Eastern Europe on Tuesday, because of the situation in the Middle East, saying that given the fragility of that situation, it believes the return to normal energy supply flows will not be immediate.
(English version by Loredana Fratila-Cristescu)