In September, Inflation Rate Inches Down To 4.94%

• Tobacco, cigarettes drive consumer price index up 0.4%

The annualized inflation rate decreased to 4.94 per cent in September from 4.96 per cent in August, although consumer prices gained 0.39 per cent from the previous month, the National Statistics Institute (INS) reported.

Foodstuff prices lost a minor 0.16 per cent, while services and non-edible products gained 0.51 per cent and, respectively, 0.79 per cent.

Lucian Anghel, Chief Economist of Banca Comerciala Romana (the Romanian Commercial Bank, BCR), noted that September was the second consecutive month with an inflation rate below 5 per cent. He pointed out that, except for cigarettes, tobacco, water, sewerage and garbage removal services, all prices had practically stagnated.

"The inflation rate decreased slightly as tobacco and cigarettes have an important quota in the consumption basked and their price increased by 5.78 per cent," Anghel said. In his opinion, such data indicated that the National Bank of Romania had a very good chance to make the inflation target for this year.

"The inflation rate was a bit above the average expectations in September," said Laurian Lungu, Managing Partner of Microanalitica, who believes that structural deficiencies such as an imbalance between demand and supply, continue to exist. Lungu voiced the opinion that, If the National Bank was to make the inflation target, it would only be a marginal achievement, of 4.5 per cent in the best case.

The price of tobacco and cigarettes increased by 5.78 per cent in September, followed by eggs with 1.8 per cent, various fresh and canned vegetables with 1.7 per cent and water, sewerage and garbage removal services with 1.67 per cent. On the bright side, the price of fresh fruit decreased by 5.01 per cent, which was interpreted as a normal, seasonal, fluctuation.

Among non-edible commodities, fuel became 0.37 per cent cheaper, whereas the price of cars and car parts lost 0.5 per cent. Rents stagnated in September, and so did railway fares. On the other hand, airline fares increased by 0.54 per cent, telephone service gained 0.47 per cent, and medical services became by 0.31 per cent more expensive.

Rozalia Pal, Senior Economist with UniCredit Tiriac Bank, believes that the inflation rate will pick up this month, leading to a 0.4 per cent increase in the consumer price index. Pal explains this forecast by the increase in the excises on tobacco, corroborated with a slight depreciation of the national currency. "Overall, the inflation rate will continue to decrease, reaching the National Bank"s target," she noted.

The International Monetary Fund (IMF) has projected an inflation rate of 4.3 per cent at the end of the year, whereas the National Bank of Romania is aiming for 3.5 per cent, give or take one percentage point. The National Bank has also revised the inflation rate forecast for 2010 to 2.8 per cent from 2.6 per cent. The target for 2010 has been set at 3 per cent, give or take one percentage point.