Romanian Inflation Resumes Surge at End 2021 as Rate Hikes Loom

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Romania’s inflation resumed a surge at the end of last year, paving the way for the nation’s central bank to continue monetary tightening that has trailed its regional peers. 

Consumer-price growth advanced 8.2% from a year earlier in December, compared with 7.8% in November, data showed on Friday. That’s above the 7.9% estimate in a Bloomberg survey. Inflation was 0.7 compared with the previous month. 

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Inflation is forecast to climb throughout eastern Europe, although a temporary cap on end-user electricity and gas prices in Romania may stanch the surge through the spring. A more moderate outlook for price increases has prompted Romania’s central bank to raise interest rates at a slower pace than regional peers.  

Policy makers currently see inflation re-entering the 1.5%-3.5% target band only toward the end of 2023; price growth is seen slowing toward 5.9% at the end of this year.Energy prices surged 28% last year, with the biggest increase of about 52% being reported for gas prices. Fuel prices also increased more than 20%, data published Friday showed.”Supply shocks will continue to account for 90% of Romanian inflation, as households are hit with higher energy and gas bills and real wage growth is likely to be negative this year,” said Dan Bucsa, a London-based economist at UniCredit. Core inflation could top 2022 peer rankings because of food prices, he said.

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