Romanian inflation: No surprises this time

In monthly terms, food inflation came in at 0.29%, below last year’s average of 0.41%. Eggs and fresh fruit prices grew at the strongest pace across the food items basket, but were largely in line with expectations. Non-food inflation came in at 0.31%, almost in line with last year’s average of 0.36%. Nothing particularly eye-catching here this time. Lastly, services inflation came in at 0.27%, marginally above what we had expected but below last year’s average of 0.57%.

In year-on-year terms, both food inflation remained constant at 5.1%, non-food inflation picked up slightly to 4.4%, while services inflation made another shy step in the right direction, sitting now at 7.1%.

Overall, there are multiple factors at play adding upside pressures to inflation at the current juncture. Among the most important are last year’s drought continuing to leave its mark on food inflation, a less stimulative but still uncertain fiscal policy, higher fuel excise duty starting on 1 January, rising oil prices, and still robust consumer demand.

Further down the line, there are important uncertainties regarding the energy price caps and/or the removal of the basic food items commercial mark-up. There will also be uncertainties about this year’s increased tax burden, particularly to the extent companies can pass it through into prices.