Halfway through the summer, the inflationary rate in July went beyond every expectation, increasing to 1.2%, which is one step away from this year's peak seen in January - 0.3%. All this even though the inflation would usually reach the annual low in mid summer.
Inflation exceeded the 1% threshold four times in seven months, so that the inflation calculated by relating it to December 2002 reached 7%, considering National Bank of Romania's target for the end of the year is 14%. NBR was talking about an inflationary decline to 12-13% this spring. #leadend#
Given that the monthly inflation was coming close to an all-time low in July 2002, the annual inflation calculated as July/July rose to 14.8%, above the levels in May and June.
Nobody expects inflation to constantly drop in Romania. NBR, however, anticipates an "inflationary loop" for this fall, brought about by the increase in the utility tariffs. An inherent ROL depreciation induced by the central bank becoming a constant foreign currency buyer might add up, as well. The inflation still below the target has made the actual appreciation of the ROL against the EUR/USD basket to amount to 2.9%, so that there is enough room for depreciation.
One thing is for sure and that is Romania cannot possibly hope to see one-digit inflation next year, not as long as it keeps registering monthly rates of more than 1%.
Still, the "performance in the first half leaves room for the inflation to slightly speed up in the months to come, so as not to jeopardise the full-year target," Radu Craciun, ABN Amro Bank senior analyst commented.
July saw a series of rises in the prices of foodstuffs, which stand chances of becoming more serious in August and September, because of the drought-caused problems the agriculture is experiencing. Bread and potatoes were the foodstuffs to have registered the highest price increases in July, 2.9% and 1.4% respectively.
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