Wednesday, December 12, 2018

Moldova holds rate steady under new governor Armasu

      Moldova's central bank kept its base rate steady at 6.50 percent, saying the risk of low inflation in 2019 and 2020 remains intact due to more moderate global oil and food prices than forecast in the November inflation report.
     The National Bank of Moldova (NBM), which has maintained its rate since December 2017, also said there is a risk inflation may be lower than expected in the next two quarters due to a high supply of some crops while the assumptions for the rest of the forecast horizon are unchanged.
     Balancing the downside risks to inflation, NBM pointed to the exchange rate of the leu that is likely to generate inflationary pressures
     Moldova's inflation rate fell to 0.9 percent in November from 1.2 percent in October, the lowest inflation rate since December 2009.
      In its November inflation report the central bank forecast inflation in the first two quarters would be below its target range of 5.0 percent, plus/minus 1.5 percentage points, but then rise to the upper end of its range by the end of next year. In early 2020 inflation would then decelerate.
     It was NBM's first monetary policy decision under the leadership of former Finance Minister Octavian Armasu who took over as governor on Nov. 30 for a 7-year term following the resignation of Sergiu Cioclea.
     Cioclea became governor in 2016, replacing Dorin Dragutanu who resigned after a $1 billion embezzlement scandal that led to major street demonstrations, a plunge in the leu and soaring inflation, and aid from the European Union and the International Monetary Fund.
     Under Cioclea, the central bank improved transparency in bank ownership and guided the sale of stakes in large lenders to foreign investors.
     When he announced his resignation, Cioclea said this was for personal reasons and that he had fulfilled his mission.
     After plunging in 2015, the leu turned around in May 2016 and appreciated steadily until August. Since then it has traded sideways against the euro and was quoted at 19.5 today, up 5 percent this year.


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