AAFBR: June confirms the start of a disinflationary trend, but not the end of the inflationary episode

The slowing down of inflation in June confirms the starting of a disinflation trend but it is not the end of inflationary episode and going towards the target of 2.5% of the National bank is still a long process, considers Flavius Valentin Jakubowicz, vice-chairman of the Association of Financial-Banking Analysts of Romania (AAFBR).“Inflation slowed in June, and this is a welcome sign. The annual rate fell to 10.4%, down from the peak reached in May, and, on a month-over-month basis, prices were virtually flat, rising by just 0.06%. Fuel prices fell, and some fruits and vegetables became cheaper due to seasonal factors. This is, therefore, good news, but it must be interpreted carefully, because not all components of inflation are moving in the same direction. The slowdown stems largely from base effects and moderating energy and fuel prices-precisely the areas that drove inflation upward over the past year. As the energy shock of the summer of 2025-particularly the rise in electricity prices following the end of the price cap scheme-gradually drops out of the comparison base, we can expect the annual rate to continue to decline in the second half of the year. "However, this is largely statistical disinflation, not necessarily an easing of underlying pressures," said Flavius Valentin Jakubowicz.He mentioned that the part which remains uncomfortable is that of services. Here prices grow by almost 14%, rents with over 40% and local utilities with about 16%.The AAFBR president argues that this is inertial inflation, reflecting wage costs and expectations already factored into prices, and that it is correcting slowly. “My conclusion is that June confirms the start of a disinflationary trajectory, but not the end of the inflationary episode. The return to the National Bank’s 2.5% target remains a lengthy process, which depends less on energy and more on moderating inflation in services and anchoring expectations. Until then, prudence in monetary policy and predictability in fiscal policy are necessary,” said Flavius Valentin Jakubowicz. The annual inflation rate fell to 10.42% in June from 10.85% in May, as services rose by 13.67%, non-food goods by 12.29%, and food prices by 5.75%, according to data released Monday by the National Institute of Statistics (INS). (Photo:https://www.aafb.ro/)