Could the inflation target be missed because of petrol price hike?

The stagnation in price of food and services, the low share of petrol in the consumer basket, as well as the temporary positive effect of the increase in the price of fuels are arguments in favour of continuing the disinflation process, say analysts.

Fuels saw their price rise by 5.3% in the first quarter of the year, while consumer prices in the economy rose by an overall 2.1% in the first three months of 2010.

This is the second-highest rise recorded by a group of products, with the exception of tobacco and cigarettes, which saw a 15% price rise. Petrol pump prices rose from 3.71 to 4.33 RON per litre since the end of last year, whilst the price of premium petrol crossed the 5 RON/litre threshold.

However, annual inflation was lower in the last two months, tempered by the stagnation of food prices, which account for 37% of the consumer basket used for calculating the price index. Fuels make up 7.5% of Romanians' consumer basket. This means that a Romanian's 1,370-RON average net salary is spent as follows: 507 RON on food and 103 RON on petrol.

"I don't think the rise in the price of fuels will have a destabilising effect on this year's inflation target. Although the price of oil has probably exceeded the upper band for the inflation forecast, it may only be a temporary rise (...)," says macroeconomics analyst Laurian Lungu.