BCR: Oil prices rise by 10% could lead to an increase in inflation in Romania by 0.4%

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An increase in oil prices by 10% could lead to an increase in inflation in Romania by 0.4 An increase in oil prices by 10% could lead to an increase in inflation in Romania by 0.4 pp over the course of a year, an analysis published by the team of Research Department of BCR shows. The main impact comes from the direct effects on the energy component on inflation and the indirect effects on the goods and services we consume, according to Hotnews.

In the baseline scenario (crude oil close to the current level of $ 60 per barrel on average in 2020), the annual inflation rate will reach 3.4% in December 2020, in the absence of other strong supply-side shocks (tax changes, agricultural production), quotes Hotnews.

And in an alternative scenario, with the oil price at $80 per barrel on average in 2020, the annual inflation rate would reach 4.1%, above the NBR target, which would justify a prudent monetary policy of the NBR. “The main impact comes from the effects of the first round. On the other hand, the effects of the second round, due to the indexation of wages, are modest, but their relevance increases during the second year. Therefore, given that oil prices fluctuate close to the current level of about $ 60 per barrel, the annual inflation rate is expected to reach a level of 3.4% in December 2020, in the absence of strong supply-side shocks. In the case of an alternative scenario, where the oil price would rise to $ 80 per barrel, the annual inflation rate could again reach the upper limit of the target range of 3.5%, which should justify a more prudent monetary policy by the NBR,” show BCR analysts.

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