Annual inflation will exceed the 8 percent level in April and May after which it might decrease, if the inflationary expectations will not put pressure on salaries and the exchange rate and the agriculture will follow a positive trend, analysts say.
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The leu started losing ground against the euro, at the end of 2007 and the process continued this year. Romania’s leu lost an average of 1.89 percent against the euro, from 3.6528 in February to 3.7218 in March. Also, last year’s drought took its toll over agriculture and it inflated prices for some food products.
Consumer prices upped 8.63 percent from March 2007 to March 2008, a record high since January 2006; the increase, which beat the analysts’ estimates, came after the price of services, fuels and some food products grew.
The 8.63 percent level seen in March should be the year’s high, if the turmoil in the U.S. does not amplify and if the exchange rate and the agriculture follow a smooth path, Banca Comerciala Romana chief economist Lucian Anghel said.
Ionut Dumitru, the chief economist of Raiffeisen Bank Romania, said annual inflation will exceed 8 percent in the following two months after which it might lower to 6 percent, in December.
The 8.63 inflation level in March, exceeding the 8.3 percent forecast made by the Central Bank of Romania (BNR), proves the increase in March of the key policy interest to 9.5 percent was necessary, Millennium Bank trader Ciprian Dascalu said.
A new increase of the monetary policy rate would signal a higher inflation level, yet we do not foresee such a move, said Lucian Anghel.
The interviewed economists said the 2 percent fall of the leu against the euro, in March vs. February, caused prices to increase, especially on the services part.
Yet, the recent appreciation of the leu had a smaller effect over prices, proving inflation is more sensitive to a weaker leu.
Anghel explained the positive evolution of the agriculture could lower inflation, similarly to last year’s fall.
Monthly inflation in March stood at 0.67 percent as foodstuff prices upped 0.55 percent and the price of non-food products climbed 0.67 percent. Tariffs for services advanced 0.92 percent.
A 10.82 percent increase was registered in the price of foodstuff, year-on-year in March 2008. The price of services grew 10.69 percent in the analyzed period. Prices for non-food commodities went up 5.91 percent, from March 2007 to March 2008.
In the third month of the year, the price of citrus went up 6.77 percent against February and the price of edible oil climbed 3.44 percent. The price of cheese upped 2.14 percent, fuel prices advanced 2.31 percent.
Air transportation prices grew 1.88 percent and phone bills rose 1.87 percent.
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