Moldova's central bank slashed its base rate by a further 300 basis points to 10.0 percent amid decelerating inflation and a rebound in economic activity, adding that it was keeping a closely eye on the potential impact of Britain's vote to leave the European Union.
The National Bank of Moldova (NBM) has now cut its rate by 950 basis points this year and said the cut aimed at anchoring inflation expectations close to its target of 5.0 percent, plus/minus 1.5 percentage points.
The central bank also cut the rate on overnight loans by 300 basis points to 13.0 percent and the rate on overnight deposits to 7.0 percent. The required reserve ratio on convertible currencies was maintained at 14 percent and the ratio of leu and non-convertible FX liabilities at 35 percent.
Moldova's inflation rate fell for the fifth consecutive month to 7.9 percent in May from a recent high of 13.6 percent in December and 8.3 percent in April, a decline that was in line with the central bank's May forecast.
Meanwhile, the economy of Moldova - located between Romania and the Ukraine - expanded by an annual 0.8 percent in the first quarter of this year following a contraction in the previous two quarters, boosted by an increase in value added in all sectors except for construction and other services.
Data for April also signaled a rebound of economic activity, the NBM said, with exports up by an annual rate of 18 percent, imports by 21.4 percent, industrial production by 10 percent, retail by 0.4 percent and trade in services by 2.1 percent.
The exchange rate of Moldova's leu, which fell by almost 21 percent against the U.S. dollar last year, has been relatively stable this year and was trading at 19.8 to the U.S. dollar today, essentially unchanged from 19.7 at the start of the year.