Inflation slightly up in Romania to 4.67% y/y in October

Romania's headline inflation edged up slightly to 4.67% y/y in October from 4.62% y/y in September, as the prices increased by 0.67% m/m, according to data published by the statistics office INS.

The small advance came amid analysts' expectations for a marginal slowdown witnessed by a Bloomberg survey median of 4.6% y/y. Most of the forecast error from our side came from volatile food items, Erste Research (which expected 4.4% y/y inflation in October) explained in a research note.

Further acceleration to 4.9% y/y is anticipated by the central bank (BNR) by the end of the year, and after that, it all depends on the government's fiscal and budgetary corrective package.

Under the baseline scenario, Romania's inflation would drop to 3.5% y/y by the end of 2025, but BNR sees multiple sources of uncertainty and consequently kept this month the monetary policy rate at 6.5%, which is in line with a moderately restrictive posture. Further rate cuts depend on the fiscal and budgetary package's calendar and structure.

The CORE2 inflation edged down marginally to 5.6% y/y in October – while still remaining above the headline inflation that is constrained by the controlled prices.

Thus, the average price of the energy basket, including natural gas, electricity, and heating, decreased by 6.5% y/y as of October. Some food prices are also controlled – but the food prices as a whole increased slightly faster than the headline inflation, by 4.75% y/y.

The prices of services marked the fastest annual advance, +7.66% y/y in October, witnessing a robust rise in households' incomes. The prices of non-food goods were dragged down by the energy prices and rose by only 3.45% y/y as of October.

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