Moldova's central bank left its main policy rates unchanged, including the rate on short-term operations at 19.50 percent, saying past policy measures are still working their way through the economy and will continue to have further impact on inflation.
The National Bank of Moldova (NBM), which has raised its key rate by 1300 basis points this year, largely repeated its view from November, including the statement that today's decision was aimed at anchoring inflation expectations and the depreciation of the leu currency was the main risk to inflation.
Moldova's inflation rate rose to 13.5 percent in November from 13.2 percent in October and the central bank expects persistent inflationary pressures in following quarters due to the impact of unfavorable weather on agriculture and the comparison with low inflation last year.
The NBM confirmed that it expects inflation to temporarily exceed its upper target limit of 6.5 percent. The central bank targets inflation at 5.0 percent, plus/minus 1.5 percentage points.
Moldova, a former Soviet state located between Romania and Ukraine, has seen its leu currency depreciate since mid-20111 and it fell sharply in January this year. After a brief rebound in April and May, and then further depreciation, it has been slowly been firming since early October. The central bank raised rates from December through August.
Today the leu was trading at 19.7 to the U.S. dollar, down almost 21 percent this year.
To help the country's interbank money market, the central bank said it would continue to sterilize excess liquidity, offering banks liquidity through 14-day repo operations at a fixed rate equal to the base rate plus 0.25 percentage points.
The National Bank of Moldova issued the following statement: