Romanian inflation holds steady as pressures persist

Today’s data came in slightly below our expectations, but that's where the good news ends. Both food and services inflation continued to show upside pressures, coming in at 0.8% and 0.5% respectively in monthly terms. Here, fresh fruits showed a noticeable increase, while services prices continued to show widespread stickiness, with a particularly stronger month for transportation prices.

Concerning the monthly evolution of non-food items, prices fell by 0.7%, almost solely driven by gas and fuel prices which subtracted around 0.4pp compared to our forecast. Still, on the energy front, higher-than-expected electricity and heating prices compared to our forecast added around 0.1pp.

In year-on-year terms, food inflation picked up to 5.6%, non-food inflation slowed to 3.6%, while services inflation moderated to 6.8%. Core inflation did not move compared to the previous month, coming in at 5.3%.

Looking ahead, the recent FX depreciation episode should start to gradually add upside pressures through the coming months, although the apparently better behaved energy prices could offset some of the impact. At this stage, our forecast remains for no further FX depreciation for the rest of the year, though some temporary overshoots are still possible. In the near term, risks to our inflation outlook could also come from the anticipated fiscal package, but this is very much dependent on the final form of the measures.