The central bank decided to lower the key interest rate twice this year, in July, from 7% per annum to 6.75% per annum, and in August to 6.5% per annum.
The key interest rate had been unchanged since January 2023. The annual inflation rate eased to 4.62% in September from 5.10% in August 2024. The decline was mainly driven by cheaper fuel and energy prices, mainly on the back of lower crude oil prices, the impact of which outweighed that of new price hikes in food and tobacco products this month.
The annual inflation rate continued to decline in the third quarter of 2024 as a whole, albeit more slowly than in the previous three months and compared with forecasts. Compared to June, it declined in September by 0.32 percentage points (from 4.94%), as the broad declines in momentum recorded in this interval in administered prices and fuel prices - under the influence of base effects and the unexpected decline in crude oil prices - were largely offset in terms of impact by the rise in food prices and to a lesser extent in electricity prices, prioritized in the wake of the severe drought this year.
At the same time, the annual rate of adjusted CORE2 inflation slowed its downward trend over the third quarter as a whole, including relative to the forecast, falling to 5.6% in September from 5.7% in June. The deceleration continued to be driven by disinflationary base effects in the non-food sub-components and the downward dynamics of import prices. These factors were largely dampened in this period by the unfavorable statistical effect in the processed food segment and higher prices for some agri-food commodities, as well as higher wage costs, which were at least partly passed on to some consumer prices, also amid still high short-term inflationary expectations and solid demand for goods.
According to the NBR, the annual inflation rate calculated on the basis of the harmonized index of consumer prices (HICP - inflation indicator for the EU Member States) fell to 4.8% in September from 5.3% in June 2024. At the same time, average annual CPI inflation eased to 6.1% in September from 7.2% in June 2024. In turn, the average annual rate of HICP inflation eased to 6.4% in September 2024 from 7.3% in June 2024.
The main interbank money market rates remained constant in October, while long-term government bond yields rebounded and remained on a steep upward path - relatively in line with developments in advanced economies and in the region - as investors reconsidered the likely path of the Fed's interest rate, also impacting on overall risk appetite. Against this backdrop, the leu/euro exchange rate remained relatively stable in October at the higher level to which it had returned in the middle of the previous quarter. However, the national currency depreciated noticeably against the US dollar, given its strengthening on international financial markets, the NBR notes.
The annual dynamics of credit to the private sector continued to increase in September to 8.4%, up from 7.7% in August, mainly as a result of an acceleration in the growth of loans in lei to non-financial corporations, but also with a significant contribution from the change in credit to households in lei. The share of the lei component in credit to the private sector extended its upward trend to 69.8%, from 69.7% in August.
