The annual inflation rate will rise slightly in the last months of 2024 and will display a marked fluctuation in the first half of 2025, staying above the target band and the previously anticipated values, the National Bank of Romania (BNR) said in its November 2024 Inflation Report, which incorporates the latest available data and information.
According to the updated forecast for the annual inflation rate evolution, this is the consequence of the two-way base effects that will play out in the short term, but also of this year's severe and the increase in the quotations of certain commodities, which will continue to affect food and energy price dynamics.
The annual inflation rate is expected to resume its decline on a higher trajectory than the one in the previous projection, falling below the upper limit of the target band only at the beginning of 2026 and hovering in this interval until the end of the forecast horizon, the BNR said in a release.
The central bank mentions that significant uncertainties and risks arise from the future tax and revenue policy, considering the fiscal-budgetary measures that could be implemented from 2025 for budget consolidation purposes. Labor market conditions and the wage dynamics also remain a source of uncertainty and risk. The evolution of energy and food prices also remains a source of inconclusiveness, as is the future trend of oil quotations, against the backdrop of lingering geopolitical tensions.
The war in Ukraine and the Middle East conflict, as well as the European and global economic developments amid the escalation of geopolitical tensions, are a source of heightened uncertainties and risks to the outlook of economic activity, and implicitly for the medium-term evolution of inflation.
Based on assessments and the currently available data, the central bank's Board of Directors of the NBR decided in its Friday meeting to maintain the key interest rate at 6.50 percent per annum. Also, the monetary authority decided to keep the lending facility interest rate (Lombard) at 7.50 pct per annum, while maintaining the deposit facility rate at 5.50 pct per annum, and leave the minimum reserve requirement ratios on both RON- and foreign currency-denominated liabilities of credit institutions unchanged.
The latest quarterly report on inflation will be publicly presented in a press conference on November 11, at 15:00. The minutes of today's deliberations regarding the adoption of the monetary policy will be published on the BNR website on November 20, 2024, at 15:00. The next meeting of the BNR Board of Directors dedicated to the monetary policy is scheduled for January 15, 2025.
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