Inflation inside the targeted area

The prices of food and non-food products increased by 0.2% m/m while services remained flat.Food products remained calm mainly because of the subdued domestic demand, while some categories of goods and services that had traditionally seen significant monthly increases in the past (fuels, water and sewerage services) had a more favourable evolution. RON monthly appreciation produced positive effects on phone and air transport tariffs. The recent hikes in excise duties produced no second-round effects and the persistent gap of the aggregate demand mitigated these adverse shocks.

Today's data supports a new cut in the key rate to a record low of 6.75% at the next monetary policy meeting on March 29th. Lower inflationary pressures, negative output gap and stricter fiscal and income policies of the government in line with the requirements of the IMF are the fundamentals behind our view.

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