The annual inflation rate is likely to increase gradually in the coming months, according to the January 10 monetary board minute of the National Bank of Romania (BNR), which estimates a peak inflation rate of 8.6% in June 2022, followed by a decrease of the headline inflation to 5.9% in December 2022 and 3.3% in September 2023.

At the board meeting, BNR hiked the refinancing rate by 25bp to 2%, widening the interest rate corridor by another 25bp to 1%, in a move that disappointed half of the analysts who anticipated (and found as appropriate) a much hawkish approach.

The renewed worsening of the short-term inflation outlook was fully ascribable to the direct and indirect effects – both recent and future – of adverse supply-side shocks affecting in the period ahead both the evolution of exogenous CPI components and core inflation dynamics, Board members repeatedly underlined.

However, elevated uncertainties still lingered over the effects of temporary schemes to compensate and cap the hikes in energy prices, as well as over how they would be assessed and included in the CPI calculation. At the same time, the overall balance of supply-side risks to the inflation outlook remained tilted slightly to the upside in the short run, Board members concluded.

Nevertheless, a downward correction of energy commodity prices in the latter part of 2022 and a more obvious improvement in global production and supply chains, currently at an early stage, could not be ruled out.

andrei@romania-insider.com

(Photo source: Cagkan Sayin/Dreamstime.com)