The average consumer prices in Romania rose by 1.8% in October alone, pushed up by higher energy prices, while the annual inflation rate reached 7.9% y/y — a significant 1.6pp advance from 6.3% in September and more importantly above the consensus expectations.
It was the steepest monthly inflation rate since July 2010, when the VAT rate was hiked from 19% to 24%.
The surge in inflation exceeded expectations and in this regard, the 25bp policy rate hike — even if accompanied by a 50bp hike of the Lombard rate) by the National Bank of Romania (BNR) on November 9 — looks even more dovish.
In October alone, two-thirds (1.2pp) of the 1.8% m/m inflation was caused in roughly equal shares by the 21.3% monthly advance of the natural gas price and the 6.5% monthly increase in the fuel prices.
Over the past year, the two energy items plus a third one — electricity — accounted for over half of the 7.9% y/y inflation rate.
The natural gas price soared by 41% y/y and contributed 1.4pp to the overall inflation, fuel prices rose by 23.5% y/y and contributed 2.1pp to inflation and the electricity price rose by 24.7% y/y, contributing 1.1pp to inflation.
By comparison, food prices rose more moderately, by a still significant 5.3% y/y and the fees paid for services by under 4.0% y/y.