Romania\u2019s headline inflation rate dropped from 5.9% in April to 5.1% y\/y in May, coming well below the 5.6% Bloomberg median forecast as the regulated energy prices fell for the second month in a row, according to data published by the statistics office INS.<\/p>\n
The core inflation also eased to 6.3% y\/y in May from 6.7% y\/y in April.<\/p>\n
The steady disinflation, stronger than expected for the second month in a row, besides the core inflation dropping well below the monetary policy rate (7% since January 2023), supports expectations for a rate cut at the July 5 monetary board (there is no board meeting scheduled in June).<\/p>\n
After the statistics office released the May inflation, Austrian group Erste revised its year-end inflation forecast to 4.0% y\/y from 4.2% y\/y and a 4.9% y\/y official target of the central bank.\u00a0<\/p>\n
Erste analysts kept unchanged the core inflation forecast for December 2024 at 4.9%, as the unexpected May inflation figures were exclusively due to non-core items (energy prices).<\/p>\n
\u201cMay inflation surprise cements our view for the first NBR rate cut in July by 25bp to 6.75%, and we expect the key rate to reach 6.0% by year-end,\u201d the Erste Research note reads.<\/p>\n
Erste analysts support their expectations on the disinflation surpassing the central bank\u2019s expectations and, supplementary, the encouraging messages conveyed by the ECB\u2019s recent rate cut.<\/p>\n
\u201cThe National Bank of Romania (BNR) projected inflation at 6.0% by the end of the second quarter of the year (Q2 2024) in its May Inflation Report. Our preliminary estimate shows June CPI falling further to 4.7% y\/y. The ECB rate cut in June should make NBR more confident about the timing of the easing,\u201d argues Erste in its research note.<\/p>\n
Detailed May inflation data show that food prices increased by 1.2% y\/y, non-food prices by 6.4% y\/y (energy prices dropped by 10.7% y\/y), and the prices of services by 9.3% y\/y.<\/p>\n
On a monthly basis, consumer prices dropped by 0.1% m\/m, dragged down by marginally lower food prices (seasonal effect) and 0.3% lower non-food prices (the natural gas price dropped by 8% m\/m).<\/p>\n