BOFIT: Russia’s overall economic performance steady in February; construction investment has supported wartime growth
4 days ago
At 4.1% year-on-year, July inflation for Romania came 0.1ppt higher than our call. This will probably be the highest print for the year. We maintain our 3.8% year-end forecast.
The 0.1ppt error on our side is due almost exclusively to lower than anticipated deflation for vegetables. Food inflation inched 0.2ppt higher to 5.2%, non-food prices accelerated by 0.5ppt to 3.4%, while services CPI decelerated to 4.1% from 4.3%.
We see headline inflation below but close to 4.0% for the rest of the year. Presenting the inflation report, the NBR governor Mugur Isarescu sounded relatively relaxed about the prospects of headline inflation hovering around the upper range of the NBR target band (i.e.3.5%). The tone was slightly more harsh though when it came to core inflation, which the central bank sees slightly above 3.5% for the rest of the forecasting horizon (2Q2021). In fact, the NBR sees core inflation exceeding the headline number from the first quarter of 2020.
We believe that the sticky inflationary environment will keep the pressure elevated on monetary policy to firmly anchor inflation expectations. While we don’t envisage any policy tightening, the room for complacency is fairly limited in the short term as well. We expect the central bank to loosen the liquidity management once headline inflation prints sustainably below 4.0%. The first rate cuts are unlikely before the second quarter of next year, in our view.
Related Content
Opinion
BOFIT: Russia’s overall economic performance steady in February; construction investment has supported wartime growth
The central factor supporting Russian economic growth last year was the sharp increase in fixed capital investment. Increased budget spending was also used to finance investments.
PANNIER: Caspian military drills that exclude Russia and Iran have some people in Moscow asking questions
Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan going ahead with “Birlestik-2024”. Russian consternation is growing.
COMMENT: The Three Seas Initiative's digital imperative
While digital infrastructure in the region is growing, support infrastructure designed to handle the growth in demand is what requires investment.
TEHRAN BLOG: Are Iran and Israel going to war? It’s already begun
The Middle East is no stranger to tension, and recent developments have brought the delicate balance of peace and conflict in the region to international attention.
Crisis Group warns resolution of conflict between Serbia and Kosovo increasingly distant
There is “scant hope” of Belgrade and Pristina overcoming their difficulties and normalising relations, says a new Crisis Group report.
Most Read
-
Russia’s war economy boosted by rising oil prices
2 days ago
-
Fresh evidence suggests that the April 2022 Istanbul peace deal to end the war in Ukraine was stillborn
1 day ago
-
Russia’s $13.4bn current account surplus in March second highest since 2007
1 day ago
-
Russian peacekeeping forces reportedly leaving Nagorno-Karabakh
1 day ago
-
Russia's finance ministry re-engineers tax system
1 day ago
-
Iran vs Israel: Who is better equipped for war?
4 days ago
-
Saudi Arabia to scale back plans for Neom city
8 days ago
-
BREAKING: Iraq, Syria and Jordan close airspace amid Iranian strike on Israel
4 days ago
-
Oil continues to flow to Israel via Turkey despite Erdogan’s vehement speeches on plight of Gaza
5 months ago
-
PANNIER: Caspian military drills that exclude Russia and Iran have some people in Moscow asking questions
5 days ago
-
Russia could pay off its entire external debt tomorrow, in cash
18 days ago
-
Speculation swirls of “Men in Blue” in Crocus City Hall terrorist attack linked to FSB
23 days ago
-
Albanians campaign on social media to keep bus bridge created in freak accident
1 year ago
-
UBN: Russia could take the Baltic states in 48 hours
28 days ago
-
BRICS announce a blockchain-based payment system to create a common currency
21 days ago