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4.9 Inflation & Monetary Policy - Romania
One year after it peaked at 16.8% y/y, Romania’s headline inflation dropped by 10 percentage points (pp) to 6.7% in November 2023, on a combination of base effects and decreasing prices of food and fuels.
CORE2 inflation diminished by 1.25pp from October to November, dropping just under 9% y/y from the 14.2% y/y peak in February.
Both headline and CORE2 inflation rates thus dropped below the respective levels projected by the National Bank of Romania (BNR) for the end of the year.
It is worth noting that the disinflation occurred amid robust private consumption and constantly increasing (in real terms) wages.
A sustainable decrease in the CORE2 inflation is requisite for the central bank to consider relaxing its monetary policy rate, currently at 7%. The fiscal package enforced by the government is expected to generate an inflationary wave in the first months of 2024 and the BNR will wait to see its magnitude before taking further steps. The direction
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