Data on inflation

The Romanian Central Bank estimates that the annual rate of inflation will keep dropping

Mihaela Ignătescu, 05.04.2024, 13:50

The National Bank of Romania decided to keep the key interest rate at 7% per year, a level that has remained unchanged for one year and four months. The interest levels at which commercial banks can borrow from the NBR and those they receive when they keep money in deposits with the central bank have also been kept. Central Bank specialists say that the annual inflation rate increased, in line with forecasts, in January 2024, to 7.41%, but decreased in February to 7.23 percent.

The higher inflation rate compared to the end of last year is the result, mainly, of the annual dynamics of the price of electricity, as well as the increase in the price of fuels and tobacco products, against the background of the increase in excise duties and the increase in the price of crude oil, states the NBR. According to its estimates, the annual rate of inflation will continue to decrease in the coming months, but on a slightly higher trajectory than the one highlighted in the medium-term forecast from February 2024. Uncertainties and risks are looming over inflation arising from the fiscal measures recently applied in order to support the budget consolidation process, as well as from the capping of the retail price of basic food products, which was extended until the end of the year.

At the same time, increased uncertainties and risks are associated with the future conduct of fiscal and revenue policy, having as sources the budget execution of the first two months of the year, the dynamics of wages in the public sector and the full impact of the new Pension Law. The evolution of the crude oil price will also influence inflation, the National Bank says. The war in Ukraine and the conflict in the Middle East, as well as the economic developments in Europe, especially those in Germany, continue to generate uncertainties and risks regarding the perspective of economic activity and, implicitly, the medium-term evolution of inflation.

As in the case of the budget deficit, which is too large in relation to the requirements of the European Commission and potentially destabilizing for the country’s finances, also in the case of inflation, Prime Minister Marcel Ciolacu is optimistic. He assured that inflation will decrease in the next period and will reach 5% at the end of the year. The head of the executive wanted to remind the fact that, when he assumed his mandate, in June of last year, inflation was quoted at double digits and was constantly reduced thanks to the measures taken by the executive. We will also fall within the deficit target, said the head of the government. He specified that the deepening of the deficit is not generated by consumption, but by investments that will return to the economy and be found in taxes. (MI)