Romania’s total inflation increased slightly, up to 4.67% y/y in October, from 4.62% y/y in September, prices increased by 0.67% y/y, according to data published by INS statistical office.

The small advance came amid analysts’ expectations for a marginal slowdown, seen by a Bloomberg survey average of 4.6% y/y. Most of the forecast error on our part came from volatile food, Erste Research (which had expected inflation of 4.4% y/y in October) explained in a research note.

A further acceleration to 4.9% y/y is anticipated by the central bank (NBR) by the end of the year, after which everything depends on the government’s fiscal and budgetary corrective package.

In the baseline scenario, Romania’s inflation would decrease to 3.5% y/y until the end of 2025, but the BNR sees multiple sources of uncertainty and, as a consequence, this month kept the monetary policy rate at 6.5%, which is consistent with a moderately restrictive posture. . Further rate reductions depend on the timing and structure of the fiscal and budgetary package.

CORE2 inflation eased marginally to 5.6% y/y in October – still above headline inflation, which is constrained by controlled prices.

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

Services prices posted their fastest annual advance, +7.66% y/y in October, on the back of robust growth in household incomes. Non-food commodity prices were dragged down by energy prices and rose just 3.45% y/y since October.

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