The National Bank of Romania has published the Inflation Report for November 2019. As shown in the report, the annual CPI inflation rate returned to the upper bound of the variation band of the flat target of 2.5 percent ± 1 percentage point, ending 2019 Q3 at 3.49 percent (0.35 percentage points below the June level and 0.2 percentage points below the latest forecast). Behind the disinflationary trend stood mainly the declines in vegetable prices amid a good harvest across the EU. Opposite influences stemmed from tobacco product prices and the slightly faster growth of the adjusted CORE2 inflation rate, indicating the persistence of inflationary pressures from fundamentals.
The average annual inflation rate continued to fall during Q3 to 3.8 percent for the CPI inflation calculated based on the national methodology and to 3.9 percent for the HICP inflation calculated in accordance with the harmonised structure. At the same time, the average annual indicator further recorded the highest level among the EU Member States for the 14th month in a row, with the differential versus the EU average remaining above 2 percentage points.
In 2019 Q3, the annual adjusted CORE2 inflation rate continued to follow the upward trend seen since the beginning of 2019, coming in at 3.4 percent in September, i.e. 0.1 percentage points above the level posted at the end of the previous quarter.
The advance reported by this component owed mainly to food prices, primarily against the background of the persistent effects of the African swine fever virus having a worldwide impact. Moreover, core inflation continued to persistently capture corporate cost pressures amid both the sizeable advance in wage earnings and in recent months the growing pressures from energy costs. Under the circumstances, the annual growth rates of the prices for non-food items and market services moved up gradually to reach peak levels during this economic expansion period.
According to the baseline scenario, the annual CPI inflation rate is foreseen to reach 3.8 percent at end-2019, 3.1 percent at end-2020 and 3.2 percent at the projection horizon, i.e. 2021 Q3. Compared to the August 2019 Inflation Report, the new scenario envisages lower levels over the entire projection interval, by 0.4 percentage points and 0.3 percentage points at the end of 2019 and 2020 respectively.
For this year, the marginally more favourable developments in the exogenous components of the CPI basket add to a slower-than-previously-foreseen advance in core inflation, while the downward revisions for end-2020 and the remainder of the projection interval are solely driven by the adjusted CORE2 inflation. For the end of the current year, the broadest revision in the case of exogenous components is associated with the recent drops in vegetable prices amid bumper crops Europe-wide, whereas the growth rates of administered prices and fuel prices are set to experience smaller revisions in the opposite direction (upwards).
For further information: The National Bank of Romania – Inflation Report November 2019