The Central Bank decided to increase the monetary policy rate to 6.25 % per annum from 5.50 %

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By RBJ
The annual inflation rate reached 15.32 percent in August, marginally above the forecast, after having fallen to 14.96 percent in July, from 15.05 percent in June. The increase was almost entirely driven by the continued hike in food prices, including the VFE component, however largely counterbalanced by the decline in fuel prices (amid motor fuel price compensation and lower oil prices), as well as by the base effects associated with developments in energy prices.
The annual adjusted CORE2 inflation rate continued to climb at a sustained pace in the first two months of 2022 Q3, albeit slower than in the previous quarters, going up to 10.4 percent in July, from 9.8 percent in June, and to 11.2 percent in August, slightly above the forecast, mainly owing to new rises in processed food prices. Thus, the evolution of this component continues to reflect the effects of large hikes in agri-food commodity prices and higher energy and transport costs, alongside the influences of bottlenecks in production chains. These were compounded by high short-term inflation expectations, the release of pent-up demand in certain segments, as well as by the significant share of food items and imported goods in the CPI basket.
The annual inflation rate calculated based on the Harmonised Index of Consumer Prices (HICP – inflation indicator for EU Member States) moved up to 13.3 percent in August, from 13.0 percent in June. Furthermore, average CPI inflation rate and average HICP inflation rate rose to 11.0 percent and 9.5 percent in August, from 9.3 percent and 7.9 percent respectively in June 2022.
The inflationary effects of supply-side shocks continue to increase in Europe and other advanced countries, with the dynamics of core inflation being relevant in this respect. In the euro area, the annual CPI inflation rate reached 10 percent in September, while in Romania’s neighbouring countries it ranges between 15 percent and 19 percent.
Economic growth slowed down considerably in 2022 Q2 versus the previous quarter, to 2.1 percent from 5.1 percent in Q1, yet much more modestly than anticipated. This makes it likely for the excess aggregate demand to see a moderate rise in this period too, contrary to expectations.
Annual GDP growth saw only a slight deceleration in 2022 Q2, to 5.3 percent, from 6.4 percent in Q1, thus remaining significantly above the forecasts. However, the largest contribution to economic growth came from the change in inventories (7.3 percentage points), while the contribution from private consumption – ranking second in terms of size – diminished considerably versus the previous quarter (to 4.7 percentage points) and that of gross fixed capital formation remained very modest, although on a slight increase. At the same time, the contribution of net exports saw a renewed strong contraction, given the slowdown in the annual dynamics of exports, concurrently with the significant re-acceleration in the annual dynamics of the imports of goods and services.

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