Moldova's central bank left its basic interest rate steady at 9.0 percent, saying the impact of monetary policy measures taken year-to-date were still working their way through the various transmission channels in the economy and thus impacting inflationary developments.
The National Bank of Moldova (NBM) has cut its rate by 1,050 basis points this year, most recently in October, as its slowly unwinds rate increases totaling 1,600 points between December 2014 and August 2015 after a plunge in the exchange rate of the leu and accelerating inflation.
The central bank said its policy stance was aimed at ensuring adequate support to lending and domestic demand amidst a volatile and uncertain external environment, including the risk of higher international food prices, changes to oil and natural gas prices and fluctuations in financial markets.
Inflation in Moldova rose slightly to 2.6 percent in November from 2.5 percent in October, sharply down from a 2016-high of 13.4 percent in January and below the central bank's lower limit of its target range of 5.0 percent, plus/minus 1.5 percentage points, for the third consecutive month.
The evolution of inflation was in line with the central bank's forecast from October when it forecast 6.3 percent average inflation for this year and 4.6 percent for 2017.
After falling sharply in 2014 and 2015, the leu has been relatively stable since January this year and was trading at 19.88 to the U.S. dollar today compared with 19.70 at the start of the year.
Moldova's economy grew by an annual rate of 6.3 percent in the third quarter of this year, up from 1.8 percent in the second and 0.8 percent in the first quarter, helped by rising exports, household consumption and capital investments.
Data for the fourth quarter was mixed, the central bank said, adding exports in October were up by 6.6 percent compared with the same 2015 period, imports were up by 12.8 percent but industrial output was down 2.2 percent.
In addition, real average wages grew by an annual rate of 9.2 percent and were 2.3 percentage points higher than in September.
The average rate on new loans in leu in November declined by 0.40 percentage points to 12.56 percent from the previous months while the rate of deposits rose by 0.24 points to 7.48 percent.
The International Monetary Fund (IMF) in November judged the central bank's policy to be "appropriate" and geared toward low inflation in a flexible exchange rate system and said a rehabilitation of the banking sector will be instrumental in unlocking credit to productive sectors.
The IMF forecast 2.0 percent growth this year, up from minus 0.5 percent last year, rising to 3.0 percent in 2017. Inflation is seen averaging 6.9 percent this year, down form 9.6 percent in 2015, and then easing further to 4.9 percent next year.