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May 12, 2023 17:22 EEST
May 12 (SeeNews) - Romania's central bank said on Friday that it lifted its inflation forecast for 2023 to 7.1% from 7% projected in February, mainly due to price increases in vegetables, fruits and eggs.
Inflation is projected to reach 4.2% at the end of 2024, before falling to 3.9% at the project horizon in March 2025, still above the upper end of the bank’s target band of 1.5%-3.5%, the central bank, BNR, said in its May inflation report.
"[...] the main unknowns continue to be driven largely by geopolitical developments, with a potential impact directly felt in the commodity markets, which are important sources of cost-push inflation," the BNR said.
Despite two years of very strong pressures on energy prices, 2023 is marked by a significant slowdown in the contribution of this group to inflation dynamics. This is mainly due to substantial base effects amid hikes recorded in the year-ago period and, partly, owing to the extension of the energy price capping and compensation scheme until March 31, 2025, with concurrent changes made to these schemes as of January 1, 2023, it added.
The effects of the war in Ukraine continue to pose significant risks and uncertainties to medium-term inflation developments, affecting investor and household confidence and their income, but also having an impact on the economies of trading partners and their risk assessment of the region.
The absorption of EU funds also poses a risk, particularly those disbursed through the Next Generation EU programme, which are conditional on fulfilling strict milestones and targets for implementing the projects, according to the central bank.
Romania's consumer prices rose by 11.23% in April, following an annual increase of 14.53% in March, the national statistical office said.
On May 10, the BNR announced that it decided to keep its monetary policy unchanged at 7%, in an effort to bring the annual inflation rate in line with the 2.5% plus/minus 1 percentage point target on a lasting basis.
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