Annual inflation likely to exceed 14% official target

Inflation in Romania can still go beyond two percent in one month, which makes the National Bank of Romania’s plans to have a full-year one-digit inflation rate even harder to materialise.

This was proven in September, when the consumer price index for the population went up 2.1%, a record-high monthly level for the past eleven months. All the more so since this year’s highest level had been posted in January – 1.3%.

If it had not been for the historical low registered in August, when inflation reported by the National Statistics Institute (INS) amounted to a mere 0.3%, the authorities’ 14% target for the entire year would have been seriously threatened. In fact, before August’s all-time low was announced, certain analysts had anticipated 15% inflation in 2003, because of the price increases expected this fall.

Four months of this year ended with inflation rates below 1%, which should be enough to make sure that even this season’s price increases will not take inflation much beyond 14%.

And so, what the central bank had anticipated in August by its 1% increase of the intervention rate has eventually happened: nine-month inflation soared to 9.6%, pushing the annualised rate up to 15.9%, after four consecutive months of less than 15%. And the fear of inflation still lingers.

The beginning of this month brought another rate climb, which was also partially applied by the Ministry of Public Finances. The Ministry even cared to state that the interest increase should not raise fears about meeting the 14% inflation rate.

Non-foodstuffs are chiefly to blame for the inflation hike in September, as their price went up 4.5%. The increase was triggered by the 33% natural gas price increase and the 17.5% more expensive electrical power. The other goods and services did not post significant price increases as compared to the previous months.

At the same time, services became some 1.4% more expensive. On the other hand, despite the drought, the prices of the farming products monitored by INS only posted a minimal increase in September – 0.2%.

To avoid additional inflationist pressure, the Government scrapped plans for an increase in the heating price, which will be set by the local authorities.

Inflation outpaced salary raises in four months out of eight: except for January, March, April and July, the consumer price index exceeded the index of average net wages.