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Iulian Ernst
Senior Editor

Iulian studied physics at the University of Bucharest, and he sees himself as a physicist in the broadest sense of the word. He also studied economics at Charles University in Prague and Central European University in Budapest, after a master’s program in business administration at Bucharest Academy of Economic Studies. Since recently, he’s been exploring coding and data analysis for business and economics. As a freelancer, he worked for nearly two decades as an analyst for ISI Emerging Markets, Euromonitor International, Business New Europe, but also as a consultant for OMV Petrom and UkrAgroConsult. Iulian was part of the founding team of Ziarul Financiar. At Romania Insider, which he joined in 2018, he is reviewing the latest economic developments for the premium bulletins and newsletters. He would gladly discuss topics such as macroeconomics, emerging markets, Prague, energy sector including renewable, Led Zeppelin, financial services, as well as tech start-ups and innovative technologies. Email him at iulian@romania-insider.com. 

 

Romania’s unleashed inflation reaches 13.8% in April

The average consumer prices increased above expectations by 3.7% in April alone, while the annual inflation rate has advanced to 13.8% from 10.2% in March, the statistics office (INS) announced on May 11.

The food prices increased by 13.5% compared to April 2021 (YoY), the natural gas price soared by 85% YoY and the price of fuels by 35% YoY.

The worst is not over, though, and higher inflation readings are expected later during the summer.

In perspective, the central bank’s dovish 3.75% refinancing rate and even the 4.75% Lombard rate, reached after the moderate 75bp rate hike operated on May 10, look insufficient to curb the expected inflation - suggesting that more rate hikes are needed rather sooner than later -- while the next monetary policy meeting is scheduled no sooner than July 6.

The exogenous drivers (energy and food prices) may be dominant, but data suggest that they have spilt over quickly in the context of all sorts of financial support extended to households and companies by the authorities concerned about the effects of the Covid-19 crisis and the social impact of the rising energy prices. 

The adjusted CORE2 inflation, which reflects the prices under the effect of the monetary policy, has advanced to 8.3% in April from 7.1% in March - according to our estimates based on the data published by INS.

CORE2 inflation excludes from the consumer basket the goods with volatile prices (fruits, vegetables, eggs), the fuels, electricity, natural gas, tobacco and alcohol and the other goods with regulated prices.

The Lombard rate thus lags some 355bp below adjusted CORE2 inflation, which suggests that the consumer prices are already on an uncontrolled path that will spiral until the prices reach demand-side constraints (firms’ and households’ budgets) that were just relaxed by the authorities in the post-pandemic context.

Specifically, this will mean higher NPL rates, higher unemployment and lower real incomes, consequently lower retail sales and more corporate insolvencies.

The National Bank of Romania (BNR) will release its updated inflation outlook on May 12, but it already disclosed expectations for the headline inflation to remain in the double-digit area by the end of H2 of 2023. 

(Photo: Michaeljayberlin | Dreamstime.com)

iulian@romania-insider.com

Normal
Profile picture for user iuliane
Iulian Ernst
Senior Editor

Iulian studied physics at the University of Bucharest, and he sees himself as a physicist in the broadest sense of the word. He also studied economics at Charles University in Prague and Central European University in Budapest, after a master’s program in business administration at Bucharest Academy of Economic Studies. Since recently, he’s been exploring coding and data analysis for business and economics. As a freelancer, he worked for nearly two decades as an analyst for ISI Emerging Markets, Euromonitor International, Business New Europe, but also as a consultant for OMV Petrom and UkrAgroConsult. Iulian was part of the founding team of Ziarul Financiar. At Romania Insider, which he joined in 2018, he is reviewing the latest economic developments for the premium bulletins and newsletters. He would gladly discuss topics such as macroeconomics, emerging markets, Prague, energy sector including renewable, Led Zeppelin, financial services, as well as tech start-ups and innovative technologies. Email him at iulian@romania-insider.com. 

 

Romania’s unleashed inflation reaches 13.8% in April

The average consumer prices increased above expectations by 3.7% in April alone, while the annual inflation rate has advanced to 13.8% from 10.2% in March, the statistics office (INS) announced on May 11.

The food prices increased by 13.5% compared to April 2021 (YoY), the natural gas price soared by 85% YoY and the price of fuels by 35% YoY.

The worst is not over, though, and higher inflation readings are expected later during the summer.

In perspective, the central bank’s dovish 3.75% refinancing rate and even the 4.75% Lombard rate, reached after the moderate 75bp rate hike operated on May 10, look insufficient to curb the expected inflation - suggesting that more rate hikes are needed rather sooner than later -- while the next monetary policy meeting is scheduled no sooner than July 6.

The exogenous drivers (energy and food prices) may be dominant, but data suggest that they have spilt over quickly in the context of all sorts of financial support extended to households and companies by the authorities concerned about the effects of the Covid-19 crisis and the social impact of the rising energy prices. 

The adjusted CORE2 inflation, which reflects the prices under the effect of the monetary policy, has advanced to 8.3% in April from 7.1% in March - according to our estimates based on the data published by INS.

CORE2 inflation excludes from the consumer basket the goods with volatile prices (fruits, vegetables, eggs), the fuels, electricity, natural gas, tobacco and alcohol and the other goods with regulated prices.

The Lombard rate thus lags some 355bp below adjusted CORE2 inflation, which suggests that the consumer prices are already on an uncontrolled path that will spiral until the prices reach demand-side constraints (firms’ and households’ budgets) that were just relaxed by the authorities in the post-pandemic context.

Specifically, this will mean higher NPL rates, higher unemployment and lower real incomes, consequently lower retail sales and more corporate insolvencies.

The National Bank of Romania (BNR) will release its updated inflation outlook on May 12, but it already disclosed expectations for the headline inflation to remain in the double-digit area by the end of H2 of 2023. 

(Photo: Michaeljayberlin | Dreamstime.com)

iulian@romania-insider.com

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