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BNR : According to the present evaluations, the annual rate of inflation will probably increase gradually over the next months

January 24, 2022

The annual rate of inflation will probably increase gradually over the next months, under the impact of the shocks on the part of offer, and the evolution of the pandemics and the associated restrictive measures remain a major source of uncertainties and risks at the address of estimates, at least for short term, show the National Bank of Romania (BNR) estimates. The BNR Board, gathered on Monday has decided to increase the rate of the monetary policy interest at the level of 2% per year, from 1.75% per year, starting with 11th January 2022.    ‘According to the present evaluations, the  annual rate of inflation will probably increase gradually during the next months, under the impact of the shocks on the part of the offer, surpassing the values presented in this time horizon by the estimate for medium term of November 2021. Responsible for the worsening of the near perspective of the inflation are the ample increases of prices in electricity and natural gas – even in the context of measures applied for compensation and capping – as well as by processed food, mainly due to the growth of the quotations of energy products and food goods. Their impact is meant to amplify and prolong the positive deviation of the annual rate of inflation from the high limit of the target interval, especially after the measures for compensation and capping of the prices in energy stop, but it is also meant to generate basic effects for disinflation on a longer period of time’ BNR says.   Significant uncertainties remain, however, associated to the effects of the temporary measures for compensation and capping of the electricity and gas prices for the population, as well as the way of their evaluation and inclusion in the IPC calculus. Uncertainties and risks will still come from the evolution of the quotations of the raw materials, especially energy and food ones, as well as from the blockade in the global chains of production and supply, the BNR report says.    ‘At the same time, the evolution of the pandemics and the associated restrictive  measures remain an important source of uncertainties and risks at the address of the estimates, at least for short term, in the context of the spreading of the pandemic wave provoked by the more contagious variant of the Corona, Omicron, as well as of the insufficient progress of vaccination on a domestic level, and the possible impact brought about by this wave on the European economies, strongly affected by the energy crisis and the persistence of the blockade in the production and supply chains’ according to BNR.   Other worries and risks continue to be associated with the fiscal policy behaviour, due to, on the one hand the budgetary deficit possibly inferior to the target recorded in 2021 and, on the other hand, the coordinates of the budgetary programme approved for the current year, which aims at an acceleration of the fiscal consolidation, according to the commitments assumed in the procedure for excessive deficit, but in a difficult  economic and social context both at internal level and global level as well. A source of uncertainties and risks is represented by the absorption of the European funds, especially of those connected to the Next Generation EU programme, which is conditioned by the meeting of strict targets and milestones in the implementation of the projects approved.    ‘BNR carefully monitors the evolution of the internal and international environment and is prepared to use the instruments at hand in order to meet the fundamental objective regarding the stability of the prices on medium term’ the central bank says. According to the schedule announced, the next meeting of the BNR board dedicated to the monetary policy will take place on 9th February 2022.

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