The headline inflation in Romania edged marginally above 5% y\/y in February from 4.95% y\/y in January, but well above the 4.7% y\/y market consensus and probably also above the central bank\u2019s expectations \u2013 thus putting into question the monetary authority\u2019s (recently revised) 3.8% y\/y inflation forecast.<\/p>\n
The monthly inflation remained at an elevated rate in February (+0.9% m\/m) amid a 1.1% rise in non-food prices and a 0.7% rise in food prices and services fees.<\/p>\n
CORE2 inflation decelerated marginally in February at 5.0% y\/y from 5.1% previously, remaining 0.2 percentage points above the central bank\u2019s 4.8% forecast for end-Q1.<\/p>\n
This price overshoot in February was primarily driven by higher-than-anticipated natural gas prices, which rose 9.1% m\/m in the month, Erste Research analysts explain the discrepancy between their expectations and the actual inflation.\u00a0<\/p>\n
Erste analysts expected only a 5.0% m\/m gas price rise in February, but higher-than-expected consumption put the average prices up. The regulated natural gas price returned in February 2025 at the same level as it was in February 2024.<\/p>\n
Erste analysts believe that February inflation came as a negative surprise for the central bank as well, making it feel less inclined to cut interest rates this year.\u00a0<\/p>\n
\u201cWe continue to believe that the first rate cut of 25bp will be at the August meeting, but the 5.75% terminal rate for this year might be at risk of ending higher,\u201d the Erste Research report reads.<\/p>\n