Thursday, March 1, 2018

Moldova maintains rate, still sees disinflation in 2018

     Moldova's central bank kept its base rate at 6.50 percent, saying data over the last 6 weeks confirms its forecast from January that disinflationary pressures will continue in 2018 as economic activity remains below the equilibrium level, with the trend first changing in 2019.
      Inflation is therefore expected to fall rapidly, helped by significant changes to regulated prices and the comparison with last year's high inflation, said the National Bank of Moldova (NBM).
      The NBM shifted into a neutral policy stance in December 2017 after 22 months of rate cuts in which the policy rate was slashed by 13 percentage points.
       This monetary policy easing along with the central bank's efforts to increase lending activity, fiscal policy and rising remittances should ensure growth of around 3.5 percent this year, NBM said.
       Moldova's inflation rate dropped to 6.5 percent in January from 7.3 percent in December and in January the central bank forecast that inflation would drop to around 2.5 percent by the fourth quarter of this year.
      By the second quarter of 2019 inflation is then seen returning to the NBM's target of 5.0 percent, plus/minus 1.5 percentage points, with risks around this forecast stemming from regulated prices, the impact of unfavorable weather on agriculture, along with global food and energy prices.
       For the full 2018 year the NBM forecasts average inflation of 3.7 percent and 4.7 percent for 2019.
       Moldova's economy grew by an annual 5.4 percent in the third quarter of last year, up from 2.5 percent in the second quarter with the exchange rate of the leu continuing last year's trend of appreciation.
        Today the leu was trading at 16.6 to the U.S. dollar, up 2.9 percent this year and up 19.6 percent since early 2017.



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