Tuesday, June 8, 2021

Moldova holds rate, RR to maintain monetary stimulus

     Moldova's central bank, which has lowered its reserve requirement three times this year, left its key interest rates and reserve requirement steady, saying this would maintain the current level of monetary stimulus, which is favorable for the evolution of domestic demand, lending and economic activity.
     The National Bank of Moldova (NBM) kept its base rate at 2.65 percent and the rate on overnight loans at 5.15 percent and the deposit rate at 0.15 percent.
     The required reserve ratio on banks' domestic currency and non-convertible currencies was kept at 26.0 percent along with the ratio of convertible currencies at 30.0 percent.
     Last year NBM lowered its base rate five times and by a total of 2.85 percentage points from March through November but since then it has been kept steady.
     But in March this year the bank cut the reserve ratio by 200 basis points to help boost inflation and economic activity to counter a negative fiscal momentum.
     Moldova's inflation rate fell to only 0.2 percent in January this year - falling below its target of 5.0 percent, plus-minus 1.5 percentage points - but since then it has risen and hit 2.8 percent in April.
     At an extraordinary board meeting on April 5 the ratio was then cut another 200 basis points as liquidity had tightened due to tax payments and then at the regular meeting on April 30 the ratio was cut another 200 basis points to the current level.
     "The economic recovery is still fragile amid uncertainties associated with the subsequent evolution of the pandemic and supply shocks dictated by the external environment," the bank said, adding domestic demand remains modest amid weak fiscal momentum.
     The bank added it would carefully monitoring consumer prices, the internal and external macroeconomic situation and at "the right time" will use the necessary measures to create monetary conditions to achieve its fundamental objective.



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