Snap12 June 2018Updated one month ago

Romania: CPI hits 5.4% in May

Inflation hit its highest level in almost five years (since June 2013). Core inflation, however, inched 0.1ppt lower to 3.0%, in line with our expectations

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Headline inflation was in line with the Bloomberg median but above our call of 5.2%. Our forecast error came almost entirely from underestimating the price increases of some food items (vegetables in particular) and the excise duty for tobacco - which seemed to take effect in a more phased way than anticipated (we included most of the impact in last month's inflation). Overall, food prices were up by 3.9% year on year and contributed 1.3ppt to May inflation. Non-food jumped by 7.7% YoY and thus contributed 3.5ppt. Services increased by 2.8% YoY,  reflecting diminishing pressures from domestic demand and contributing only 0.6ppt to the total 5.4%.

Broad based inflationary pressures

NIS, ING
NIS, ING

Headline and core CPI diverging

NIS, ING
NIS, ING

Core inflation, on the other hand, was better behaved and decreased by 0.1ppt to 3%, in line with our expectations. This reinforces our view of no change in the key policy rate for the rest of the year. Today’s CPI is still consistent with our year-end forecast of 3.6%, which is similar to the central bank's (NBR) projection. Risks are clearly skewed to the upside.