Consumer prices in Romania rose by 8.4% y/y on average in January 2022 and the inflation rate accelerated from 8.2% in December, the statistics office INS announced. Compared to December, consumer prices increased by 1.5% m/m.

This was slightly more than expected, given the energy prices are still capped and subsidised by the government until the end of March.

“The 0.4ppt forecast error on our side came largely from natural gas prices which advanced by over 6.00% compared to the previous month, versus our call for flat monthly prices,” ING wrote in a research note.

“Again it seems that the inner mechanics of a liberalised, but temporarily capped market are still eluding our attempts to estimate price moves,” the bank’s analysts commented. A 1.3% monthly increase in tobacco prices and 6.4% in heating energy also came as a surprise.

The bank has revised its forecast for average 2022 inflation to 8.8%, with the year-end rate at 8.0%. For 2023, the bank sees average inflation at 5.5%, and 4.5% by year-end

The annual inflation figure as of January 2022 was driven by the 10.2% y/y advance of non-food prices, while food prices rose by 7.2% y/y. Service fees increased by 5.7% y/y.

Natural gas prices increased by 60.9% y/y, and the fees charged by municipalities for district heating delivered rose by only 21.5% y/y.

Other significant advances were for postal services, by 22.5% y/y, and among food items, the price of edible oil increased by 25.7% y/y, that of potatoes by 25.6%.

Consumer price inflation is expected to peak at 11.2% in April, once the support schemes for household users of electricity and natural gas have expired, and will remain close to double digits at the end of the year (9.6%), under the baseline inflation scenario recently unveiled by the National Bank of Romania (BNR).

However, it will subside quickly and enter the target inflation band at the end of 2023, the central bank expects.