Europe’s inflation championship

Sursa: Inquam Photos / Ovidiu Dumitru Matiu

Europe’s attention is focused toward the UEFA Euro 2024 men’s football championship currently taking place in Germany, with 24 countries fighting for the coveted title of European champion.

It is the sixth final tournament where  Romania has participated but the first since 2016 and Tuesday’s win over Ukraine is again has lifted the nation’s mood rekindling memories of the 1990s “golden generation” led by Gheorghe Hagi,writes eToro analyst for Romania, Bogdan Maioreanu.

But, while keeping an eye on the games, investors’ attention is also focused on inflation and how this will shape future interest cuts by Central Banks.

If the European Championship would be on who managed to defeat yearly inflation and not about football, Romania would not stand a chance. Out of the 24 participating countries, Romania would finish second to last with a yearly inflation of 5.1%. Last would be Turkyie with an incredible 75%. The inflation European championship would have been won by Italy whose inflation reached 0.8%, followed by Switzerland (1.4%) and Georgia (2%). Outside the Euro Championship participants, Romania is still the country with the largest inflation rate in the European Union. In Europe, after Turkyie, the next countries are Russia (8.3%), Iceland (6.2%), Belarus (5.7%) and in fifth place, Romania. Even Ukraine, a country at war, is showing lower inflation than us (3.3%).

However, in Romania inflation has been falling. In May 2023, yearly inflation was 10.64%, in December last year it reached 6.61% while in January 2024 it was 7.41% pushed up by Government decisions. The drop in May 2024 to 5.1% surprised both financial analysts’ expectations and the National Bank of Romania, whose forecast was of 6% inflation in Q2 of this year. The next meeting of NBR’s board is on 5th of July and analysts are wondering if we will see the first interest rate decrease from the current level of 7%. The NBR policymakers underscored the importance of monitoring decisions made by the ECB and the Fed, alongside global geopolitical risks and economic developments within Europe.

ECB already decided its first interest rate decrease with 0.25%, with future decisions to be based on data and evaluated meeting-by-meeting. The statement leaned towards a hawkish tone, emphasising data-dependence. The ECB remains committed to maintaining a restrictive monetary policy until the 2% inflation goal is achieved. Inflation forecasts for 2024 and 2025 were raised more than expected, including core inflation. Meanwhile the Fed kept the interest rate unchanged and now its dot plot is guiding for only one rate cut in 2024 and four in 2025. The decision was dovish enough to lead US 10-year interest rates to fall from 4.43% to 4.21%.

For the time being our football fans, some of them investors too, are happy that we see the Romania football team playing again in a final European Championship tournament and winning. While we do not know which team will win the football tournament for sure the big winner looks to be UEFA, which is expected to receive revenues of about 2.5 billion euros from broadcast and sponsor deals, sales of tickets, hospitality packages and licensing from staging of this 51-game tournament. Another big winner is Germany, the organizing country, which is expecting a boost of one billion dollars revenue from tourism.

Romania’s inflation dips below 6% in April to three-year low



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