Disinflation process continues

RON monthly appreciation had positive effects on phone and air transport tariffs determining a monthly decrease of 0.1% in services.

Key risks for the disinflation process in the next months come from the evolution of the administered prices and oil prices on global markets. On the hand a sluggish domestic demand, a rather stable RON and a good agricultural crop during the summer could support the disinflation process.

The latest inflation data supports a continuation of the monetary policy easing cycle at the next meetings with the key rate probably cut to 6% by the end of June. After a sharp decline of more than 300 bp since the beginning of this year due to improved liquidity on the domestic market, higher external resources secured for the financing of the budget deficit (IMF, EC, Eurobond issue) and better sentiment among foreign investors towards the Romanian economy, government yields could consolidate around the key rate in the coming period.