| The deceleration in Romanian inflation from 5.1% in August to 4.6% in September is a positive sign for the trend of easing price pressures, ING Bank said Friday.
However, the details indicate that policymakers are still far from declaring victory. The Dutch bank says it maintains its year-end forecast of 4.2%, acknowledging the presence of upside risks.
Food inflation came in stronger than the bank anticipated, with the 0.8% monthly advance being the second highest of the year. Fruit and vegetables showed particular strength, increasing by 3.1% and 2.7% versus the previous month.
Non-food inflation was only marginally above bank expectations due to a smaller-than-expected decline in fuel prices, partly offset by weaker energy prices. Services inflation was pretty much in line with the bank’s forecast. Apart from airfares, which recorded a monthly drop, almost the entire category continues to suffer from broad-based stickiness.
The pick-up in food inflation could be an early sign of the impact of this year’s significant drought – an upside risk the bank is watching in the months ahead.
Meanwhile, non-food inflation decreased visibly in annual terms and reached 3.3%. Here, there are upside risks as well. In the short run, geopolitical tensions are set to remove at least some of the gains, which came on the back of lower oil prices.
On top of that, wage growth remains elevated, well into double digits, keeping the upside pressures from the demand channel alive at least in the short term.
Lastly, despite making some progress, services inflation remains the most stubborn, at 7.8% annually – clearly indicating that this is not the time for policy complacency. |
