The Board of the National Bank of Romania, having convened for the meeting of 5 October 2021, decided: >>> to increase the monetary policy rate to 1.50 percent per annum, from 1.25 percent per annum, as of 6 October 2021; >>> to raise the deposit facility rate to 1.00 percent per annum, from 0.75 percent per annum, and the lending (Lombard) facility rate to 2.00 percent per annum, from 1.75 percent per annum, as of 6 October 2021; >>> to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The annual inflation rate went up to 4.95 percent in July from 3.94 percent in June, while in August it reached 5.25 percent, exceeding significantly the upper bound of the variation band of the target and running mildly above the forecast. The increase was driven almost entirely, during this period too, by exogenous CPI components, particularly by the considerable hike in natural gas and electricity prices in July and, to a lower extent, by the further rise in fuel prices, mainly on account of the non-petrol-diesel subgroup.
The annual adjusted CORE2 inflation rate went up to 3.0 percent in July, from 2.9 percent in June, and to 3.2 percent in August, thus coming slightly above the forecast. Its evolution reflects primarily the effects of the rising prices of some commodities, including agri-food items, and higher energy and transport costs, as well as the influences of the increased demand for goods and services, overlapping those of supply-side constraints, alongside the upward adjustments of short-term inflation expectations.
The average annual CPI inflation rate and average annual inflation rate calculated based on the Harmonised Index of Consumer Prices climbed to 3.3 percent and 2.6 percent, respectively in August, from 2.9 percent and 2.4 percent, respectively in June 2021.
Economic activity continued to expand in 2021 Q2, at a relatively slower quarterly pace (1.8 percent compared to 2.5 percent in Q1), but somewhat brisker than anticipated, moderately exceeding its pre-pandemic level. The evolution makes it likely for the aggregate demand surplus to increase during this period in line with the latest medium-term forecast. At the same time, amid the base effect associated with the sharp economic contraction in the same year-earlier period, the annual growth rate of economic activity went up to 13.0 percent in Q2 from -0.2 percent in Q1.
All major aggregate demand components contributed to the abrupt pick-up in annual GDP dynamics, albeit to a considerably different extent. The main determinant was private consumption – whose advance was however lower than expected in annual terms – its contribution being closely followed by the change in inventories. A positive contribution, albeit much more modest, was made by gross fixed capital formation, in the context of renewed markedly faster growth in new construction works, mainly on account of residential construction works, which outweighed the impact of the notable decline in the dynamics of net investment in equipment (including transport equipment).