Frames analysis: Inflation has fallen to 6.2 per cent, but not because prices have fallen

Inflation dropped at 6.2% but not because the prices dropped, but following the removal of last year’s shocks from the comparison, according to Frames analysis.'A fall in inflation does not necessarily mean lower prices,' warned Adrian Negrescu, manager of the consultancy firm Frames, back in July, when the figure fell for the first time in 12 months. This is precisely the distinction that the August data confirms: prices have not fallen, but have simply stopped rising at the same rate as last year. According to experts at Frames, the fall in inflation is not due to a cooling of demand or a success of monetary policy, but to the fact that last year’s shocks are no longer factored into the comparison. The liberalisation of electricity prices in July 2025 and the increases in VAT and excise duties in August 2025 have, one by one, dropped out of the ‘year-on-year’ calculation. The effect is immediately apparent: electricity now shows an annual increase of just 1.82 per cent, having exceeded 50 per cent in previous months.The figure that describes what the households really lived is the average rate of the last twelve months: 95%. Namely, in the interval September 2025 – August 2026, the consumption prices were, on average, with almost ten percentage over the previous year. Since the beginning of this year, the indicator went up by 4.6%.The Frames analysis shows that the breakdown on inflation shows an economy with two very different speeds.Services remain the problem. They have risen in price by 11.28 per cent over the past year and by 8.45 per cent since the end of 2025 alone – that is, at almost twice the rate of the overall index.   The sharpest rise is in rents, with an annual increase of 39.7 per cent, almost entirely concentrated this year – up 37.21 per cent since December alone. Next come water, sewerage and waste collection charges, up 14.12 per cent; television subscriptions, up 13.2 per cent; car repairs, up 10.81 per cent; and heating, up 10.7 per cent.   Services are the slowest component of any disinflationary process, as they encompass wages, commercial rents and annual contracts. The fact that they are still rising at double-digit rates, in a month when the overall index fell to 6.2 per cent, is a sign that underlying pressure has not disappeared.   'We are seeing services heavily affected by the rise in fuel and electricity prices,' explains Frames’ manager, outlining the mechanism at work.   According to the analysis, in an economy dependent on road freight transport, the cost at the pump does not stay at the pump: it travels up the supply chain and ends up in the prices charged by hairdressers, mechanics and restaurants, with a delay of several months.   The only significant monthly increase in August came from fuel: up 3.47 per cent in a single month, with petrol rising by 6.64 per cent and diesel by 6.12 per cent. Over the year, fuel prices have risen by 17.03 per cent, with petrol up 25.49 per cent and diesel up 34.61 per cent – the highest annual increase across the entire consumer basket.     The reason is fiscal and regulatory: on 1 July, both the cap on the trade mark-up introduced by Government Emergency Ordinance 19/2026 and the reduced excise duty rates expired simultaneously, against a backdrop of volatile international prices. Standard diesel reached an all-time high of 10.98 lei per litre in early August, forcing the Government to temporarily cut excise duty by 20 per cent between 16 and 31 August, through a dynamic excise duty mechanism reviewed every two months.   The significance of this figure is evident from a single indicator in the press release, analysed by experts at Frames: excluding fuel, the consumer price index fell by 0.08 per cent in August compared with July. In other words, without fuel, August would have been a month of deflation.   ‘The big question mark remains the trend in fuel prices,’ insists the Frames manager. It is the only component that could reverse the trend in the coming months. The counterbalance is food. Food prices fell by 0.71 per cent in a single month and rose by just 2.62 per cent year-on-year, well below the overall index.   The harvest made all the difference: vegetables are 8.51 per cent cheaper than a year ago, potatoes 15.21 per cent cheaper, and fresh fruit 18.18 per cent cheaper. Added to these are falls in the prices of milled products (down 4.11 per cent), maize meal (down 5.27 per cent), sugar (down 2.27 per cent) and butter (down 1.24 per cent). Conversely, coffee has risen in price by 15.02 per cent, eggs by 10.88 per cent, and cow’s milk by 8.31 per cent.   Natural gas, the only item to fall in the non-food sector, is 3.44 per cent cheaper than in August 2025 and 9.97 per cent below the December level, as a result of Emergency Ordinance 12/2026.   A minor detail, but one of relevance to those following the sector: from January 2026, gambling is included in the calculation of the consumer price index. Since the end of last year, prices in this category have risen by 9.6 per cent.   In August, the National Bank revised its inflation forecast for the end of 2026 upwards, from 5.5 per cent to 6.1 per cent, citing the effects of the heatwave and drought on energy production and the rise in fuel prices, which alone contributes 1.1 percentage points to the final figure.   A return to the target range of 2.5 per cent plus or minus one percentage point is not expected until the final quarter of 2027, two quarters later than in the previous projection.   The August figures are therefore already below the central bank’s forecast for the end of the year – and even ahead of the market’s expectations.   In the short term, the result opens up a debate on the timing of monetary easing. The monetary policy rate has stood at 6.50 per cent since August 2024, and BCR economists had previously estimated that it would remain at this level until May 2027. The next monetary policy meeting is on 8 October.     'The problem is the context. Disinflation is not occurring against the backdrop of an economy that is cooling in a controlled manner, but rather one that has ground to a halt: the first half of 2026 closed with a 0.7 per cent fall in gross GDP, and forecasts for this year have been cut again in recent days – ING now expects a contraction of 0.5 per cent, whilst Erste has lowered its forecast from minus 0.3 per cent to minus 0.7 per cent'', according to the Frames analysis.   In other words, inflation is falling because the basis for comparison has changed and because people are spending less, not because the economy has been stabilised. And the most inelastic component of the basket, services, remains in double figures.   ‘The practical advice that the experts at Frames have been repeating for several months relates precisely to this uncertainty: both the public and businesses should renegotiate their energy supply contracts so as to secure a guaranteed fixed price for the next twelve months. In a year in which energy remains the only truly unpredictable variable, contractual certainty is worth more than a bet on the market,’ the Frames press release adds.