In Romania January inflation due to regulated prices mainly

The spike in inflation to 4.3% in January from 3.3% in December is mainly the result of the increase in regulated prices, specifically for fuel, electricity, heating and gas, BNR’s consultant Adrian Vasilescu said. Vasilescu pointed out that the prices of some foods like fruit for example have risen too but they do not have a significant impact while the weight of the said regulated prices in the consumer basket is substantial.

The central bank expects the year-end inflation at 3.5% revising its previous forecast of 3.1%. It sees the inflation reaching a peak in Q1, followed by some moderation in the last part of the year, which should bring down the CPI increase inside the target interval (2.5%+/-1ppt), from which inflation has been deviating for the fourth consecutive month already this January. We note the NBR missed the inflation forecast for the end of last year, due to materialization of risks from the fuel and administrated price dynamics and from the government’s fiscal and income policies. The same upside-tilted risks on the inflation outlook persist this year and the strong inflation expectations might put additional pressure on the CPI developments. Therefore, we think that the inflation rise would very probably remain strong in the following periods, even if the central bank started a firm tightening trend by two consecutive hikes of the policy rate so far this year.

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