Romania’s headline inflation remained steady at 5.3% y/y in May for a third month in a row, the statistics office reported. The local currency’s nominal appreciation against the euro - of 1% m/m and 2.3% y/y, visibly supported the stability of the domestic consumer prices.
Nonetheless, at current exchange rates of RON 4.52 per euro, the local currency weakened by 3.7% from the May average quotations [RON 4.34]. If the exchange rate stabilises at the present level [RON 4.5 per euro], consumer prices will face visible upward pressures - starting with the prices of services, many of which are denominated in euro.
Consumer prices edged up moderately by 0.23% m/m in May, driven mainly by the seasonal rise in prices of fresh fruit and vegetables. Food prices increased by 0.77% m/m and their annual rise of 6.4%, slightly steeper than the average, might reflect the damages incurred by the greenhouses this year and possibly the lower grain crops last autumn.
On the opposite, the prices of non-food goods and services decreased marginally on the month in May – also helped by the 1% m/m strengthening of the currency. On the year, non-food prices increased by 5.5% y/y, visibly driven by the energy price liberalisation.
The prices of services increased by only 2.9% y/y, helped by the local currency’s appreciation.
Romania’s central bank cut its end-year inflation forecast to 3.2% y/y in its latest Quarterly Inflation Outlook released on May 8, down from 3.5% y/y forecasted in February. Actual inflation will retreat within the targeted band at an earlier moment, probably in September, the monetary authority has said.
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