The monthly inflation rate slowed slightly from April and March, when prices rose 0.52% and 0.67% on the month, respectively. In April, the country’s annual inflation rate stood at 8.62%.
Analysts had expected inflation between 0.4% and 0.7% in May, with food prices and fuels as the main drivers of the growth.
Food prices were up 0.53% on the month in May, with fresh fruit and vegetable prices dragging inflation up by 5.98% and 1.65%, respectively.
Non-food prices also rose 0.47% on the month and 5.66% on the year in May, due to a 2.26% rise in fuel prices. In April, fuel prices rose by
nearly 2%.
Romania’s central bank has set an inflation target of 2.8%-4.8% for 2008, but expects it to exceed the target range, reaching 6% by yearend due to
persistent inflationary shocks from last year.
Last month, central bank governor Mugur Isarescu said inflation will stay above the target range until the first quarter of 2009, but expects it to
start slowing this fall.
But analysts say the central bank is likely to increase its main lending rate to above 10% in the next monetary policy board meeting, to counter surging inflation.
"Inflation will continue to grow in June as well, and we expect it to reach its peak at 9.2% in July. We expect the central bank to raise its main lending rate to above 10% in the next bank’s board meeting June 26," BRD-Groupe Societe Generale analyst Florian Libocor said.
Libocor added prices will start decelerating in the second semester.
Raiffeisen Bank Romania chief economist Ionut Dumitru also expects the central bank to raise its lending rate, given the booming economic growth
in the first quarter of the year.
"We believe that the data regarding the gross domestic product growth in the first quarter were bad news for the National Bank of Romania, as the
8.2% level is much above the economy’s sustainable potential and triggers inflationary pressures," Dumitru said.
Since October 2007, the central bank has raised interest rates in five consecutive sessions to 9.75%, from an initial 7% in a bid to slow peaking
inflation.