NATIONAL BANK OF ROMANIA

Transcription

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2 The annual inflation rate dropped below the mid-point of the ±1pp variation band around the 3% target set by the NBR for annual percentage change 1 8 Target Target 27. Target Target Dec. Dec.7 Dec.8 Dec.9 Dec.1 Dec.11 Dec.12 Dec.13 Note: Variation band is ±1 percentage point. Source: National Institute of Statistics, National Bank of Romania Target Target Target Target

3 In spite of an unfavourable base effect, the average annual inflation rate is forecasted to stabilise at around 3% in 212 H2 1 percent 9 8 forecast average annual inflation rate 1 annual inflation rate Dec.9 Jan.1 Feb.1 Mar.1 Apr.1 May.1 Jun.1 Jul.1 Aug.1 Sep.1 Oct.1 Nov.1 Dec.1 Feb.11 Mar.11 Apr.11 May.1 Jun.11 Aug.11 Sep.11 Oct.11 Nov.11 Dec.11 Feb.12 Mar.12 Apr.12 May.1 Jun.12 Jul.12 Aug.12 Sep.12 Oct.12 Nov.12 Dec.12 Source: NIS, NBR projections 3

4 Determinants of inflation in 212 Persistence of the negative output gap Favourable base effects associated with higher food and fuel prices in the first part of 211 Further improvement in consumers inflation expectations, although at a slower pace than in the previous period Upward path in international oil prices Moderate depreciation of the leu against the euro and the US dollar Negative influence of adverse weather conditions on vegetable and fruit prices in the early months of 212 Entry into force of an EU directive on poultry rearing standards

5 Narrower gap between annual CPI inflation and adjusted CORE2 inflation, as the impact of adverse supply-side side shocks fades away 9 annual percentage change (%) annual percentage change (%) CPI adjusted CORE2 administered prices volatile prices tobacco prices Jan.9 Apr.9 Jul.9 Oct.9 Jan.1 Apr.1 Jul.1 Oct.1 Apr.11 Oct.11 Jan.9 Apr.9 Jul.9 Oct.9 Jan.1 Apr.1 Jul.1 Oct.1 Apr.11 Oct.11 Source: NIS, NBR calculations 5

6 Almost all CPI components contributed to disinflation 1 contributions to the annual inflation rate; percentage points percent adjusted CORE2 administered prices tobacco and alcohol vegetables, fruit fuels eggs annual inflation rate (rhs) Jan.7 Mar.7 May.7 Jul.7 Sep.7 Nov.7 Jan.8 Mar.8 May.8 Jul.8 Sep.8 Nov.8 Jan.9 Mar.9 May.9 Jul.9 Sep.9 Nov.9 Jan.1 Mar.1 May.1 Jul.1 Sep.1 Nov.1 Mar.11 May.11 Sep.11 Nov.11 Mar.12 Source: NIS, NBR calculations

7 The contribution of exogenous components to the annual inflation rate was mitigated by the decline in vegetable and fruit prices Contributions to the 12-month inflation rate March 212: 2.% (percentage points) 2.5 adjusted CORE2 food.2 adjusted CORE2 services.5 non-core components administered prices 1. fuels. tobacco and alcohol.5 eggs adjusted CORE2 non-food. -1. vegetables, fruit Source: NIS, NBR calculations 7

8 Expiry of the implementation deadline for Directive 1999/7/EC has triggered a supply-side side shock with transitory effects on food prices in several new EU Member States fixed-base index, Dec.1999=1 CPI eggs 92.5 March 212/Dec.211 percentage change CPI eggs CPI Jan. Jan.1 Jan.2 Jan.3 Jan. Jan.5 Jan. Jan.7 Jan.8 Jan.9 Jan.1 Czech Republic Bulgaria Hungary Romania Source: NIS, Eurostat, national institutes of statistics 8

9 Higher oil price amid tensions in the Middle East 5 5 % CPI fuels (monthly change) Brent crude oil price denominated in lei (monthly change) CPI fuels (annual change) Brent crude oil price denominated in lei (annual change) USD/barrel Brent crude oil price Apr.11 May.11 Jun.11 Aug.11 Sep.11 Oct.11 Nov.11 Dec.11 Feb.12 Mar.12 May.1 Jul.1 Sep.1 Nov.1 Mar.11 May.11 Sep.11 Nov.11 Mar.12 Source: NIS, Bloomberg 9

10 Inflation expectations continued to improve, although at a slower pace than in 211 Q Economic agents - expectations over the next 3 months - balance of answers (%) Feb.11 Mar.11 Apr.11 May.11 Jun.11 Aug.11 consumers* trade services, excluding trade industry - consumer goods * expectations over the next 12 months Source: EC-DG ECFIN, NBR survey Sep.11 Oct.11 Nov.11 Dec.11 Feb.12 Mar.12 Apr.12 Bank analysts - expectations over the next 12 months - annual percentage change median target-band Feb.11 Mar.11 Apr.11 May.11 Jun.11 Aug.11 Sep.11 Oct.11 Nov.11 Dec.11 Feb.12 Mar.12 Apr

11 Consumer demand and its determinants real annual percentage change balance of answers 8 real annual percentage change % retail sales (excl. motorcar sales) and services consumer confidence (rhs) disposable income consumer loans (stock) registered unemployment rate (rhs) Jan.8 May.8 Sep.8 Jan.9 May.9 Sep.9 Jan.1 May.1 Sep.1 May.11 Sep.11 Jan.8 May.8 Sep.8 Jan.9 May.9 Sep.9 Jan.1 May.1 Sep.1 May.11 Sep.11 Source: NIS, EC-DG ECFIN, NBR calculations 11

12 Recent developments in the exchange rates of currencies in the region reflect a change in risk appetite May.11 index, 31 Dec.21=1 Jun.11 RON/EUR PLN/EUR CZK/EUR HUF/EUR Aug.11 Sep.11 Source: NBR, Bloomberg Exchange rate Oct.11 Nov.11 Dec.11 Feb.12 Mar.12 Apr.12 May.11 Jun.11 RO PL CZ HU Risk premium (5-year CDS spreads) Aug.11 Sep.11 Oct.11 Nov.11 Dec.11 Feb.12 basis points Mar.12 Apr

13 Daily nominal exchange rates of currencies in the region RON/EUR ROMANIA POLAND PLN/EUR CZECH REPUBLIC 13 Jan.99 Jul.99 Jan. Jul. Jan.1 Jul.1 Jan.2 Jul.2 Jan.3 Jul.3 Jan. Jul. Jan.5 Jul.5 Jan. Jul. Jan.7 Jul.7 Jan.8 Jul.8 Jan.9 Jul.9 Jan.1 Jul.1 Jan.99 Jul.99 Jan. Jul. Jan.1 Jul.1 Jan.2 Jul.2 Jan.3 Jul.3 Jan. Jul. Jan.5 Jul.5 Jan. Jul. Jan.7 Jul.7 Jan.8 Jul.8 Jan.9 Jul.9 Jan.1 Jul Jan.99 Jul.99 Jan. Jul. Jan.1 Jul.1 Jan.2 Jul.2 Jan.3 Jul.3 Jan. Jul. Jan.5 Jul.5 Jan. Jul. Jan.7 Jul.7 Jan.8 Jul.8 Jan.9 Jul.9 Jan.1 Jul.1 Jan.99 Jul.99 Jan. Jul. Jan.1 Jul.1 Jan.2 Jul.2 Jan.3 Jul.3 Jan. Jul. Jan.5 Jul.5 Jan. Jul. Jan.7 Jul.7 Jan.8 Jul.8 Jan.9 Jul.9 Jan.1 Jul.1 CZK/EUR HUNGARY HUF/EUR Source: Eurostat, NBR

14 Annual dynamics of the nominal exchange rates of currencies in the region - EUR / national currency - 3 percentage change versus the same month in the previous year Romania Poland Czech Republic Hungary Jan. Jul. Jan.1 Jul.1 Jan.2 Jul.2 Jan.3 Jul.3 Jan. Jul. Jan.5 Jul.5 Jan. Jul. Jan.7 Jul.7 Jan.8 Jul.8 Jan.9 Jul.9 Jan.1 Jul.1 Source: Eurostat (+) appreciation; (-) depreciation 1

15 Developments in the exchange rates of currencies in the region: Jan. 1999=1 - EUR / national currency - 18 index (%) In nominal terms In real terms index (%); CPI-deflated Feb.99 Jan. Dec. Source: Eurostat RO PL CZ HU Nov.1 Oct.2 Sep.3 Aug. Jul.5 Jun. May.7 Apr.8 Mar.9 Feb.1 Dec.11 May.12 RO PL CZ HU 9 8 Feb.99 Jan. Dec. Nov.1 Oct.2 Sep.3 Aug. Jul.5 Jun. May.7 Apr.8 Mar.9 Feb.1 (>1%) appreciation; (<1%) depreciation Dec.11 Mar.12 15

16 Developments in the exchange rates of currencies in the region: Oct. 2=1 - EUR / national currency - In nominal terms In real terms 1 index (%) index (%); CPI-deflated 1 15 RO PL CZ HU RO PL CZ HU Nov. May.5 Nov.5 May. Nov. May.7 Nov.7 May.8 Nov.8 May.9 Nov.9 May.1 Nov.1 May.11 Nov.11 May.12 Nov. May.5 Nov.5 May. Nov. May.7 Nov.7 May.8 Nov.8 May.9 Nov.9 May.1 Nov.1 May.11 Nov.11 Mar.12 Source: Eurostat (>1%) appreciation; (<1%) depreciation 1

17 Abating pressures from domestic producer prices, yet rising pressures exerted by consumer goods import prices Romania: PPI for the domestic market EU15: PPI for the non-domestic market 2 annual percentage change annual percentage change Jan.7 May.7 Sep.7 Jan.8 May.8 Sep.8 Jan.9 May.9 Sep.9 Jan.1 May.1 Sep.1 May.11 Sep.11 Jan.7 May.7 Sep.7 Jan.8 May.8 Sep.8 Jan.9 May.9 Sep.9 Jan.1 May.1 Sep.1 May.11 Sep.11 - consumer goods manufacturing Source: Eurostat 17

18 Despite currently unfavourable developments, managers in industry and trade are relatively optimistic about future business prospects New orders in manufacturing Confidence indicators real annual percentage change balance of answers (%) retail trade non-domestic market domestic market industry retail trade expectations on future business* industry expectations on output level* - -5 Jan.9 Apr.9 Jul.9 Oct.9 Jan.1 Apr.1 Jul.1 Oct.1 Apr.11 Oct.11 Jan.9 Apr.9 Jul.9 Oct.9 Jan.1 Apr.1 Jul.1 Oct.1 Apr.11 Oct.11 Source: NIS, EC-DG ECFIN, NBR calculations * expectations over the next 3 months 18

19 Downward trend of lending and deposit rates on new business in recent months, also as a result of the successive policy rate cuts 1 percent per annum percent per annum new loans, total monetary policy rate new time deposits, total new loans, non-financial corporations monetary policy rate new time deposits, non-financial corporations 2 Jan.1 Apr.1 Jul.1 Oct.1 Apr.11 Oct.11 Jan.1 Apr.1 Jul.1 Oct.1 Apr.11 Oct.11 Source: NBR 19

20 The annual CPI inflation rates forecasted for end-212 and end-213 have remained unchanged from the previous round, i.e. 3.2% and 3.% respectively Moreover, the annual CPI inflation rate is projected to remain inside the ±1 pp variation band around the central targets throughout the reference period The magnitude of fluctuations in the annual CPI inflation rate is seen decreasing after the unfavourable base effect expected for 212 Q3 as the impact of transitory shocks in recent periods fades away Annual CPI inflation forecast (1) 21 Inflation targets (Dec./Dec.) 212: 3.% 213: 2.5% The uncertainty interval is calculated based on the forecast errors in the NBR projections during Source: NIS, NBR calculations and projections annual percentage change uncertainty interval annual CPI inflation rate (previous round) annual CPI inflation rate annual inflation target variation band

21 Annual CPI inflation forecast (2) Components contribution to the annual inflation forecast Dec./Dec. a year earlier tobacco products percentage points pp 3. fuels 3 VFE prices 2 administered prices adjusted CORE tobacco products.3.2 fuels.5.3 VFE prices.5.3 administered prices adjusted CORE Note: all values are rounded up to the nearest decimal Source: NBR projections 21

22 External assumptions underlying the projection The average annual values of the international oil price exceed those in the previous projection The scenario on developments in 3M EURIBOR has been revised downwards, amid expectations of a mild recession in the euro area The euro area HICP inflation rate for 212 has been revised upwards, as increases in indirect taxes (VAT) and administered prices look set to continue Oil price (USD/barrel) Economic growth in the euro area (%) Annual inflation rate in the euro area (%) 3M EURIBOR (% per annum) Source: NBR assumptions based on data provided by the U.S. Energy Information Administration, European Commission, Consensus Economics and futures prices Change versus the previous round Change versus the previous round 22

23 Exogenous pressures on inflation The scenario on administered price developments is fraught with uncertainties related to the phasing out of regulated prices on the gas and electricity markets (reference document: the European Union s Third Energy Package) The scenario on developments in volatile food prices incorporates: the assumption of a normal agricultural year slightly improved prospects for the agricultural output compared to the previous forecast (prepared during adverse weather conditions, i.e. drought, low temperatures, etc.) Administered prices annual inflation 211 Volatile food prices annual inflation end of period, % Feb. 212 IR May 212 IR 2 21 end of period, % Feb. 212 IR May 212 IR Source: NIS, NBR projections 23

24 Revision of the output gap projection compared to the previous round Factors Upwards/ Downwards GDP deviation % against potential GDP Feb. 212 IR May 212 IR Revision by the NIS of GDP statistical data and a lowerthan-anticipated GDP value in 211 Q -2 External demand detrimental impact on exports Real broad monetary conditions adequate for consolidating disinflation - Discretionary component of the fiscal policy (fiscal impulse) Source: NBR projections 2

25 Revision of the annual adjusted CORE2 inflation projection compared with the previous round The path of the annual adjusted CORE2 inflation rate* has been revised marginally downwards compared to the previous round, mainly due to the projection of a relatively wider negative output gap The annual adjusted CORE2 inflation rate is forecasted to range between 1.7% and 2% throughout the projection horizon *) This core inflation measure excludes from the overall CPI administered prices, volatile prices (of vegetables, fruit, eggs and fuels), tobacco and alcohol prices 21 Source: NIS, NBR projections Annual adjusted CORE2 inflation end-of-period, % Feb. 212 IR May 212 IR

26 Determinants of annual adjusted CORE2 inflation projection The negative output gap remains the main determinant of disinflation Contributions to annual adjusted CORE2 inflation (pp) VAT 1 Marginal impact of public sector pay rises Pressures from imported inflation will gradually abate Relative stabilisation of inflation expectations* at somewhat higher levels than those of projected inflation, attributable to the adjustment inertia and to the temporary increase in annual CPI inflation forecasted for 212 Q3 on account of an unfavourable statistical base effect *) backward- and forward-looking Q2 21 Q2 211 Note: The annual adjusted CORE2 inflation is calculated as a quarterly average in this chart, in line with its econometrically-modelled determinants. Source: NBR calculations Q2 212 import prices output gap inflation expectations annual adjusted CORE2 rate (%) Q

27 Causes External developments: Potential causes for inflation to deviate from the projected path performance of the euro area economy and investors perception on the regional and/or global economic context geopolitical tensions in the Middle East, with an impact on the oil price Volatility of capital flows to EU emerging economies given the uncertainty surrounding the success of the fiscal consolidation measures in euro area countries Uncertainties regarding the firm and consistent implementation of fiscal consolidation measures and structural reforms given the 212 electoral calendar Balance of risks Tilted to the upside Tilted to the upside Dynamics of administered prices (deregulation of the gas and electricity markets) Weather conditions and food price dynamics In equilibrium In equilibrium The materialisation of any of these risks might rekindle inflation expectations, with unfavourable effects on consumer prices. 27

28 Calendar of NBR Board meetings on monetary policy issues 27 June August 212* 27 September November 212* 7 January February 213* *) review and approval of the quarterly Inflation Report 28

29 At the end of the press conference, the following will be available on the NBR website ( Inflation Report May 212 (in Romanian) Summary of the Inflation Report May 212 (in English) PowerPoint presentation of the NBR Governor 29