RO: March CPI matches expectations at 4.9% y/y

Instant Comment , 11. Apr.
Core inflation accelerated in March

March CPI stood at 4.86% y/y, decelerating marginally from 5.02% y/y in the previous month. This came in line with our forecast of 4.85% y/y and marginally below Bloomberg consensus of 4.90% y/y. Core inflation inched up to 5.3% y/y from 5.0% y/y in the previous month as core-food and core-services inflation accelerated in monthly terms in March.

We maintain our year-end forecast at 3.7% y/y as we are still looking for a reversal of the natural gas price increase from February. Nevertheless, we see risks balance titled to the upside. March figure came above the 4.6% y/y current NBR forecast, and the central bank already stated in the press release following the April meeting that the inflation path will most likely shift higher. Core inflation came in also above NBRs projection which stood at 4.8%. With this in mind, we see NBR on hold at May meeting given the presidential election schedule. We see the first rate cut in August of 25bp and the terminal key rate for this year at 5.75% with risks for fewer cuts.

Adjusted CORE2 inflation (headline inflation minus administered prices, volatile prices, tobacco and alcohol), which is closely watched by the NBR, accelerated in March at 5.3% y/y from 5.0% previously. Diving deeper into CORE2 inflation components, we notice that core food inflation went up to 4.5% y/y in March, from 3.9% previously. Core services inflation accelerated sharply at 6.6% y/y from 5.9% y/y and core non-food moved down to 4.6% y/y from 5.6% y/y. We expect CORE2 inflation to end 2025 at 4.3% y/y but we see upside risk dependent on second round effects from global raw material prices evolution. We stick to our view that core inflation should hover above the headline inflation for most of the forecast period.

In monthly terms, consumer prices edged up by 0.27% in March. Food prices increased by 0.79% m/m mainly due to higher vegetable and meat prices. Prices of non-food items inched down by -0.34% m/m mainly on lower energy and fuel prices. Services prices rose by 0.89% m/m with a more broad-based profile.