Romania’s consumer prices (chart) increased by 0.3% month on month in December, resulting in 5.14% year-on-year headline inflation, marginally faster than the 5.11% y/y in November and only 1.5 percentage points lower compared with 6.6% y/y one year earlier, according to data published by the statistics office.

Somehow higher inflation in the last couple of months of 2024 was anticipated by the central bank in its November 2024 Inflation Report, partly on base effects. However, the monetary authority still hoped for a figure under the 5% benchmark.

Core inflation edged down marginally to 5.5% y/y in December, from 5.6% y/y in the previous three months.

In 2024, food prices increased by 5.5% y/y, prices of non-food goods advanced by 4.4% y/y while the fees paid for services advanced at the fastest pace: +7.1% y/y as of December.

On average, the inflation halved to 5.5% y/y in 2024 from 10.5% y/y in 2023.

Disinflation has reversed in November-December (after inflation reached 4.6%-4.7% y/y in September-October) and the inflationary outlook further deteriorated amid wider than expected fiscal slippage that prompted a fiscal corrective package that might be followed by further increase in taxation later in the year, with a direct impact on consumer prices. Producers in industries impacted, such as the food processing, are already calculating the new prices. The phasing off of end-user energy prices at the end of March will also have a broad impact, possibly delayed if the Government decides to prolong consumer protection for another 3-6 months as planned.

Amid the persistent inflationary risks, the National Bank of Romania (BNR) is expected to keep the monetary policy at 6.5%, at its board meeting on January 15. The BNR cut the policy rate during the summer by 0.5 percentage points from the 7% level maintained during 2023 and half of last year.