The inflation rate forecast for end-2022 was revised at 5.9%, higher by 2.5 percentage points than the level anticipated in previous forecasts.
The bank said the explanation for an overwhelming part of these revisions lies with the growing contribution of consumer basket components beyond the scope of monetary policy.
“Annual CPI inflation rate is projected at 7.5% in December 2021, following a temporary slowdown in the recent upward trend, amid the entry into force of compensations for household users of electricity and natural gas, which will also be captured by the CPI inflation rate over the period when these provisions apply (November 2021 – March 2022). Subsequently, in April 2022, once these measures have expired, the annual CPI inflation rate will reflect substantial hikes, reaching 8.6% in 2022 Q2, i.e. a peak of the forecast period. Thereafter, the CPI inflation rate is projected to lose steam, down to 5.9% at end-2022 and 3.3% at the projection horizon,” the central bank said its November inflation report.
The central bank’s recent monetary policy stance was shaped in a prudent manner, in order to bring the annual inflation rate back in line with the flat target of 2.5% ±1 percentage point and keep it there over the medium term, inter alia via the anchoring of inflation expectations over the longer time horizon, in a manner conducive to achieving sustainable economic growth in the context of the fiscal consolidation process, while safeguarding financial stability.
After the release of the August 2021 Inflation Report, a number of considerable upward risks to inflation materialised, mostly related to CPI basket components whose prices are beyond the scope of monetary policy, in particular those of energy (natural gas, electricity, and fuels). Stronger inflationary pressures also emerged and are projected to linger in the case of adjusted annual CORE2 inflation rate, which is seen reaching 4.3% in December 2021, 3.9% in December 2022 and 3.3% in September 2023.
Subsequently, the statistical data showed the pick-up in the annual CPI inflation rate to 4.95 percent in July, from 3.94 percent in June, and to 5.25% in August, exceeding significantly the upper bound of the variation band of the target and running mildly above the forecast. The increase owed almost entirely to exogenous CPI components, particularly the notable hike in natural gas and electricity prices in July. The annual adjusted CORE2 inflation rate went up to 3.0 percent in July, from 2.9% in June, and to 3.2% in August, rising slightly above the forecast, per the report.
Romania’s annual inflation rate kept its upward trend in October 2021, climbing to 7.9%, higher than 6.3% in September 2021, data from the country’s statistics board INS showed Wednesday (November 10). The highest price increases in October 2021 compared with October 2020 were recorded by electricity (+24%), natural gas (+46%) and fuel (+23%). The highest food prices were recorded by edible oil (26%) and potatoes (18%).