Romania's 5.9% headline figure came significantly lower than our 6.6% expectations and the 6.4% market consensus. Romanian inflation decelerated to 5.9% in April from 6.6% in the previous month. There was a large (unanticipated) impact estimated by the National Statistics Institute regarding government measures to cap the intermediary gas prices, which – together with a smaller but still relevant drop in the electricity price – lowered the headline rate by roughly 0.6 percentage points.
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Stripping the energy effect, price developments do not offer decision-makers many reasons to be complacent. Services inflation remains stubbornly in double digits at 10.1%, and even accelerated in monthly terms to 0.6% from 0.4% in the month prior on broad-based price pressures. Non-food inflation was dragged lower by the energy prices, but taking this out, they actually accelerated in both monthly and annual terms.
Technically, these lower-than-expectation inflation data should proportionally move the inflation profile lower for one year ahead. For the moment, however, analysts maintain their 4.8% year-end estimate. This is given that experts were anticipating upside risks within their estimate stemming domestically from the fiscal stance, strong wage growth and potential extra fiscal measures needed to keep the budget in check, and externally from the higher oil price.
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