Moldova raises rate 5th time, and RRR on inflation rise

      Moldova's central bank tightened its monetary policy stance sharply at another extraordinary meeting of its executive board - citing the recent acceleration in inflation - by raising its interest rate for the fifth time and increasing the required reserve ratio for commercial banks.
     The National Bank of Moldova (NBM) raised its interest rate on its short-term monetary policy operations by another 2 percentage points to 8.50 percent and has now raised it 5.85 percentage points since it began tightening in July last year by raising the rate and followed this up with rate hikes in September, October, December and today.

     The rate hike in October was also decided by the bank's board at an extraordinary meeting that was held in response to the country's energy crises triggered by the expiry of a gas contract with Russia.
     NBM today also raised the ratio on required reserves for commercial banks' deposits in the Moldavian leu by 2 percentage points to 28.0 percent, returning it to its level prior to a cut in April 2021. 

    The ratio on deposits on convertible foreign currencies remains unchanged, the bank said.
    The rate on overnight loans and deposits was also raised by 2 percentage points to 10.50 percent and 6.50 percent, respectively,
    "The configuration of monetary policy aims at tempering inflationary pressures to lessen the effects of shocks on the economy for its faster return to balance," the bank's board said, adding it had also raised its forecast for inflation in coming quarters amid rising global inflation.

     Inflation in Moldova, Europe's poorest country, rose to 13.94 percent in December from 12.4 percent in November for the highest rate since June 2008 and well above NBM's target of 5.0 percent, plus/minus 1.5 percentage points.

     The central bank said the recent rise in inflation illustrated the vulnerability of domestic inflation to external developments while demand is also putting upward pressure on inflation as disposable income and consumer credit its rising.

     New loans in leu rose 46.7 percent year-on-year in December, close to a historical record, and NBM said the increase in the interest rate and reserve ratio aims to reduce the growth in consumer credit, which it said had "a strong pro-inflationary impact and puts pressure on the current account deficit of the balance of payments, trade balance and exchange rate."

     In December the International Monetary Fund's (IMF) executive board approved Moldova's request for funds under its extended fund and credit facilities, enabling disbursement of US$79.8 million, with total payments under the 40-month program amounting to $558.3 million.

     Moldova's economy is recovering after an estimated contraction of 7.0 percent in 2020 due to the COVID-19 pandemic and drought, with IMF forecasting growth in 2021 of 7.5 percent and 4.5 percent in 2022.

Moldova raises rate 4th time to temper inflation

     Moldova's central bank raised its key interest rates for the fourth time this year, saying this "aims to create the monetary conditions necessary to temper the growth rates of consumer prices" amid rising inflationary expectations.
      The National Bank of Moldova (NBM) raised its base rate by 100 basis points to 6.50 percent and has now raised the rate 3.85 percentage points following rate hikes in July, September, October and today.
     The central bank also raised the rate on its other interest rates by 1 percentage point, with the interest rate on overnight loans now at 8.50 percent and the deposit rate at 4.50 percent.
     NBM said it would continue to closely monitor the domestic and international environment and "is prepared to take the necessary measures to achieve the fundamental objective of ensuring price stability."
     Inflation in Moldova, Europe's poorest country, jumped to 8.8 percent in October from 6.7 percent in September, above the central bank's target of 5.0 percent, plus/minus 1.5 percentage points.
     Today's rate hike comes after NBM's board at its regular meeting on Oct. 29 maintained its rate after raising it an an extraordinary meeting on Oct. 5, citing the uncertainty surrounding the impact of the country's "energy crises."
     In September Moldova's contract with Russia for gas supplies expired and the government had to declare a state of emergency in the energy sector, triggering the use of state funds to buy fuel.
     But last week Moldovagaz said it had paid Russia's Gazprom for the gas it had received in October and the first half of November, averting a possible crises, Reuters reported on Nov. 26.
     The payment of US$73 million was made possible after Moldova's parliament approved a budget amendment that allowed it to pay the money due.
     www.CentralBankNews.info

Moldova maintains rate after emergency hike early Oct

     Moldova's central bank left its benchmark interest rate steady after raising it an extraordinary board meeting earlier this month, saying an important reason for today's decision was the uncertainty associated with the energy crises, where rising prices for natural gas and oil will slow global economic activity, impacting domestic demand and activity.
     The National Bank of Moldova (NBM) kept its base rate at 5.50 percent after raising it by 85 basis points at an extraordinary board meeting on Oct. 5 to counter inflationary pressures from the second-round effects of the rise in energy, food, production and distribution costs.
     The rate earlier this month was NBM's third hike this year and the rate has been raised by a total of 2,85 percentage points following earlier increases in July and September.
     The bank's board today said today's policy decision took into account the pressures from domestic supply and demand, especially in the last four months, the rise in incomes along with the increase in consumer loans and mortgages.
    The central bank said a resolution of the "ongoing energy crises" is tied to government talks with Russia and other suppliers on new contracts for natural gas imports after the previous one expired last month, and it is difficult to anticipate the outcome of this.
     The expiry of the previous contract has forced the government into declaring a state of emergency in the energy sector, which includes using state funds to buy fuel.
     Last week Moldova secured preliminary approval for a US$564 million loan from the International Monetary Fund (IMF), which may unlock more funding from the European Union.
     Last year Moldova, the poorest country in Europe, received 127 million euros in aid.

    www.CentralBankNews.info

Moldova raises rate 3rd time to ease inflation pressure

     Moldova's central bank raised its rate for the third time this year, saying it "continues to gradually tighten monetary policy in order to mitigate the inflationary pressures generated by the second-round effects of global price growth, production and distribution costs, energy resources and food."
     At an extraordinary meeting of the National Bank of Moldova's (NBM) executive board, the base rate was raised by another 85 basis points to 5.50 percent and the rate has now been raised 2.85 percentage points this year following earlier hikes in September and July.
    NBM also narrowed its interest rate corridor by 50 basis points to 2.0 percent, with the rate on overnight deposits now 3.50 percent from 2.15 percent and the rate on overnight loans 7.50 percent from 7.15 percent.
    The simultaneous reduction in the corridor rates is aimed at motivating consumers' preference for savings instead of immediate consumption amid the sharp revival in economic activity in the first 9 months of the year, the central bank said.

    Moldova's inflation rate rose for the 7th month in a row to 4.6 percent in August from 3.5 percent in July, still within NBM's inflation target of 5.0 percent, plus/minus 1.5 percentage points.

    However, the central bank said its rate hike also took into account pressures from aggregate demand, which is supported by the rise in incomes and the rise in consumer and mortgage loans.

     Moldova's gross domestic product jumped 21.5 percent year-on-year in the second quarter of this year, up from 1.8 percent growth in the first quarter.

    The bank did not give a specific guidance about its future policy decisions, saying it will continue to monitor domestic and international developments and "is ready to come up with the necessary measures to meet the fundamental objective of ensuring price stability."

Moldova raises rate 2nd time on persistent inflation

     Moldova's central bank raised its main interest rates for the second time, saying there is still a risk of persistent inflationary pressures and it will monitor the risks associated with inflation and "adopt the necessary monetary policy measures in due course."
     The National Bank of Moldova's (NBM) executive board on Sept. 3 unanimously raised the base rate by another 100 basis points to 4.65 percent and has now raised it 200 points this year following the previous hike on July 30.
     The NBM also raised the rate on its other main rates, pushing up the rate on overnight loans and deposits by 100 basis points to 7.15 percent and 2.15 percent, respectively.

     "The NBM's decision was taken considering the inflationary pressures from the supply and aggregate demand, as well as the risks and uncertainties caused by the evolving pandemic situation," the bank said.

     Inflation in Moldova has accelerated in the last 6 months and rose to 3.5 percent in July from 0.2 percent in January.

     The central bank expects inflationary pressures to continue due to a rise in household income, and rising consumer and mortgage credit from the easy monetary conditions that are supporting consumption to the detriment of savings.

     The bank's executive committee said its rate hike aimed to mitigate the inflationary pressures that are generated from accelerating domestic demand fuel by growth in consumption and to temper the second-round effects of the supply shock amid higher International prices and imported inflation.

     NBM's base rate has trended lower since February 2016 from 19.5 percent interrupted by a brief tightening between June 2019 to December 2019.

     In December 2019 the central bank then resumed easing its policy stance and cut the rate by 4.85 percentage points with the last cut in November 2020. 

     But with inflation rising, NBM raised its rate in July as inflation was forecast to exceed its upper limit.

     NBM targets inflation of 5.0 percent, plus/minus 1.5 percentage points

     In its latest inflation report the central bank confirmed inflation still risks topping its upper limit and is forecast to continue to rise until the first half of 2022 before decelerating.

     "We are in a new economic cycle," the bank's governor, Octavian Armasu, said when presenting the bank's August inflation report on Aug. 6, adding the inflationary process will be long.

    "All risks related to the forecast are pro-inflationary," Armasu said, adding the only exception to this are any new measures that will be imposed in the event of a new wave of the pandemic.

     "In these conditions, in order to ensure price stability, without impeding economic growth, it is important to coordinate and synchronize fiscal and monetary policy in order to implement a set of optimal policies for the economy," he added.

     Moldova's gross domestic product grew by an annual 1.8 percent in the first quarter of this year following three quarters of contraction while the exchange rate of the Moldavian leu has depreciated in recent weeks after firming from late May.

     The leu was trading at 20.98 to the euro today, up 0.9 percent this year but down 7.8 percent since the start of 2020.

     

     www.CentralBankNews.info

     

      

  

Moldova raises rate as inflation seen persistent

      Moldova's central bank changed course and raised its main interest rates for the first time in two years after loosening its policy stance earlier this year, saying its latest forecast shows inflation may exceed the upper limit of its target range due to rising domestic demand in an environment of rising global inflation.

      The National Bank of Moldova (NBM) on July 30 raised its base rate by 1 percentage point to 3.65 percent, the first rate hike since July 2019, but left the level of banks' required reserves unchanged.
      The central bank also raised its other main interest rates by the same 100 basis points, increasing the rate on overnight loans and deposits to 6.15 percent and the deposit rate to 1.15 percent, respectively.
     In December 2019 NBM began easing its policy and continued during the COVID-19 pandemic, lowering the rate six times by a total of 4.85 percentage points, with the final cut in November last year.
     Although the central bank's executive committee has kept the rate steady until now, it has still been easing its policy stance by lowering the reserve requirement three times by a total of 6 percentage points.

      In March this year the reserve requirement was cut once to help boost inflation and then it was cut twice in April to counter tight liquidity in the banking system and maintain monetary stimulus during a fragile economic recovery.
      The required reserve ratio on banks' domestic currency and non-convertible currencies is currently 26.0 percent while the ratio on convertible currencies is 30.0 percent.

      There was little warning of the sharp shift in policy stance, with the bank in June saying it was leaving its rate and reserve requirement steady as domestic demand was modest, fiscal momentum weak and the overall economic recovery fragile.

      But in recent months Moldava's inflation rate has been ticking up and rose to 3.2 percent in June, the fifth monthly increase from a recent low of 0.2 percent in January, and the bank said its latest inflation forecast, which will be released on Aug. 6, indicated a risk that inflation would exceed the upper limit of the bank's target range of 5.0 percent, plus/minus 1.5 percentage points.

     "At the same time, inflationary pressures are supported by aggregate domestic demand, which is fueled by the recovery in household consumption against the backdrop of rising wages, the volume of new loans and remittances," NBM said.

     The improving domestic demand comes against the backdrop of a faster-than-expected recovery of the global economy and Moldova's main trading partners and persistent high prices for oil, raw materials and food, the bank said, adding:

     "Thus, the inflationary process will be persistent and not temporary," adding in these circumstances it is imperative for fiscal and monetary policy to synchronize their macroeconomic policies.

     In the first quarter of this year Moldova's gross domestic product grew an annual 1.8 percent after shrinking three quarters in a row and the bank said industrial production had risen 4.4 percent in April-May from last year, retail activity was up 24.3 percent, turnover in services was up 40.6 percent and imports were up 13.3 percent.

    www.CentralBankNews.info

 

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.
    www.CentralBankNews.info

     

Moldova holds rate, cuts reserve requirement 3rd time

      Moldova's central bank left its benchmark interest rates steady - unchanged since November last year - but lowered the reserve requirement for the third time in less than two months, saying this was aimed at mitigating and counteracting the negative effects of the COVID-19 pandemic on the country's economy and strengthening its position in supporting a recovery.
     The National Bank of Moldova (NBM) left its base rate at 2.65 percent and the interest rate on overnight loans and deposits at 5.15 percent and 0.15 percent, respectively.
     Last year the central bank cut its key rate five times and by a total of 285 basis points from March through November. 
     But at its regular meeting in early March this year the bank's executive committee cut the reserve requirement on bank's domestic currency and non-convertible deposits by 200 basis points to 30 percent to help boost inflation - which hit 0.2 percent in January - and relaunch economic activity by maintaining adequate liquidity, lower the cost of funds for banks and ensure lending activity continues to rise.
      The easing was also aimed at mitigating the risks associated with a negative fiscal momentum during what the bank said was "intensifying political uncertainty."
      At an extraordinary committee meeting on April 5, the reserve requirement on leu deposits was then cut by another 200 basis points to 28 percent as liquidity, after initially rising, declined to 3.4 billion leu in early April from 7.1 billion in mid-March, mainly due to tax payments.

     NBM said the cut would help avoid any crowding for funds out as demand from the finance ministry was rising.
     At its regular meeting today, the executive committee then lowered the reserve requirement for the third time since March 5 by another 200 basis points to 26.0 percent. The requirement for convertible currency deposits remains at 30 percent. 

     In the last two months Moldova's inflation rate has begun to pick up and rose to 1.5 percent in March but remains far below the central bank's target of 5.0 percent, plus/minus 1.5 percentage points.

    The bank's latest inflation report will be published on May 7.

     In the February report, NBM lowered its forecast for inflation to 1.8 percent from 2.5 percent but expected inflation to return to the target corridor in the first quarter of 2022, helped by a recovery of aggregate demand, which, however, will still remain negative throughout the forecast period.

     The economy of the landlocked, Eastern European country that borders Romania and Ukraine shrank an annual 3.3 percent in the fourth quarter of last year, up from a fall of 9.7 percent in the third quarter and a 14 percent fall in the second quarter.

     www.CentralBankNews.info

  

Moldova cuts rate 5th time in 2020 as inflation declines

     Moldova's central bank cut its key interest rate for the fifth time this year, saying the decision was taken following the latest inflation report and aims to support domestic demand, the lending process and the economy as a whole.
     The National Bank of Moldova's executive committee unanimously trimmed its base rate by 10 basis points to 2.65 percent and has now cut it 285 basis points this year following two cuts in March followed by cuts in August and September.
     Since December 2019, when NBM began easing after raising the rate twice earlier in the year, the rate has been lowered by a total of 4.85 percentage points.

     The central bank also cut its rate on overnight loans and deposits to 5.15 percent and 0.15 percent, respectively.

     The bank's fourth inflation report will first be published on Nov. 13 but NBM said it shows inflation is expected to decrease slightly by the end of this year and then begin an upward trajectory starting in the second quarter of 2021 and reach the bank's 5.0 percent target by the end of the forecast horizon.

     "Disinflationary pressures will continue throughout the forecast horizon - fourth quarter 2020 - third quarter 2022," the central bank said, pointing to decreasing demand from anti-COVID-19 measures, declining external demand, a negative fiscal momentum since the start of the year, a real appreciation of the national currency and unfavorable weather conditions that affect the agricultural harvest.

     In September NBM had said it was possible that inflation would fall below the lower limit of its target range of 3.5 to 6.5 percent this year and remain around that level until end-2021.

     Moldova's inflation rate fell to 2.3 percent in September from 3.5 percent in August, well below this year's high of 6.9 percent in January. 

     The country's gross domestic product shrank by 7 percent in the second quarter from the first quarter for an annual drop of 14 percent.

      Against the euro, Moldova's leu has been depreciating steadily this year but the fall has picked up sharply this month and the leu was trading at 20.36 to the euro today, down 5.2 percent this year.

      Against the U.S. dollar, the leu rose from April to mid-August, but since then it has eased to trade at 17.2 today, still up 0.6 percent this year.

     Today's meeting by the bank's executive committee was delayed from the originally scheduled date of Oct. 30 due to restrictions on their work schedule and the lack of medium-term data.

     The next meeting on monetary policy will be held on Dec. 9 rather than Dec. 2, as previously scheduled.

     www.CentralBankNews.info

     

Moldova cuts rate 4th time in 2020 to boost inflation

     Moldova's central bank cut its main interest rate for the fourth time this year to stimulate demand and economic activity as well as boost inflation so it achieves its primary objective.

     The National Bank of Moldova (NBM) cut its base rate by another 25 basis points to 2.75 percent and has now cut it by 275 points this year following two cuts in March and one in August.

     Since December 2019, when the central bank began easing after raising the rate twice last year, the rate has been cut by a total of 475 points.

     In addition to cutting its base rate, NBM also lowered its rate on overnight loans to 5.25 percent and the rate on overnight deposits to 0.25 percent.

      The bank also raised the required reserve ratio on funds in freely convertible currencies by 150 basis points to 30.0 percent for the period of Oct. 16 to Nov. 15, and for Nov. 16 to Dec. 15.

      The central bank said the increase in the reserve ratio was to strengthen the transmission mechanism of its monetary and foreign exchange policy.

     "This decision is stimulative and aimed at achieving the fundamental objective of the National Bank, as well as supporting the lending process to support aggregate domestic demand and thus the national economy," NBM said after a unanimous decision by its executive committee.

     The rate cut takes place amid disinflationary pressures, both domestically and internationally, including an appreciation of the leu, lower regulated prices on electricity, international energy and food.

     Inflation in Moldova was 4.2 percent in July, largely unchanged from 4.3 percent in June and 4.1 percent in May, NBM said it was possible inflation would fall below the lower limit of its target range of 5.0 percent, plus/minus 1.5 percentage points this year and remain around that level until the end of 2021.

     Moldova's leu has been rising steadily since early April and was trading at 16.6 to the U.S. dollar today,   up 4.2 percent this year.

    www.CentralBankNews.info

Moldova cuts rate 3rd time 2020 to keep inflation on target

     The central bank of Moldova cut its policy rate for the third time this year and its reserve requirement for the second time to keep inflation in its target range and counter the disinflationary pressures from measures to contain the Covid-19 pandemic and lower fiscal spending.

     The National Bank of Moldova (NBM) lowered its base rate by 25 basis points to 3.0 percent and narrowed its interest rate corridor by 100 points by lowering the rate on overnight loans by 75 points to 5.50 percent and raising the rate on overnight deposits by 25 points to 0.5 percent on overnight loans to "streamline the transmission mechanism of monetary policy decisions."

     "This measure creates conditions for maintaining inflation in the range of +/- percentage points from the medium-term inflation target of 5.0 percent," NBM said on Aug. 6.

     NBM, which said the policy decision by its executive board was unanimous, has now cut its base rate by 250 basis points this year following two cuts in March.

     Since December 2019, when the central bank also cut its rate for the first time after raising it in July 2019, the rate has been lowered 450 points.

     In addition to the rate cuts, NBM also cut its required reserve ratio on banks' leu and non-convertible liabilities by another 100 basis points to to 32 percent for the period of Aug. 16 to Sept. 15 and then for the period of Sept. 16 to Oct. 15.

     The reserve ratio on freely convertible currencies was raised 300 basis points to 27.0 percent for the same to application periods as on lei-denominated liabilities, the bank said, adding the decision to continue to balance the reserve ratios aims to improve financial intermediation in the domestic currency and was discussed during last month's talks with the International Monetary Fund (IMF).

      The policy decision followed the bank's third inflation report, which will be published on Aug. 13, which forecasts that aggregate demand will generate disinflationary pressures by the third quarter of 2021, mainly due to measures taken by the government to ease the pandemic, and the reduced budget expenditures in the first half of this year and a decrease in some regulated tariffs.

      On July 27 the IMF said its staff and Moldova had agreed on an economic reform program supported by a 3-year extended credit facility and extended fund facility agreements, allowing access to about US$558 million.

     Approval of this agreement is expected by the IMF executive board in September, subject to the country's implementation of a number of actions in the area of central bank independence, financial sector oversight and fiscal transparency.

     "The successful clean-up of the banking sector in the aftermath of the major bank fraud is a credit to the supervisory work of the NBM," the IMF said, adding it is in Moldova's interest to preserve the independence of the central bank and is also a critical requirement under the latest agreement.

     In March Moldova detained two current and two former senior central bank officials on suspicion of involvement in the US$1 billion theft from three banks in 2014-2015, triggering a political crises in the former Soviet republic.

      The theft led to street protests, a freeze in aid by the IMF and the European Union, a plunge in the leu's exchange rate and a rise in inflation.

      Inflation in Moldova, which is located between Ukraine and Romania, close to the Black Sea, rose to 4.3 percent in June from 4.1 percent in May and its gross domestic product grew 0.5 percent in the first quarter from the previous quarter for annual growth of 0.9 percent.

      After falling in the first three months of the year, the leu has been rising May and rose further today to 16.6 to the U.S. dollar, up 4.2 percent this year.

Moldova leaves key rates steady amid disinflation

     Moldova's central bank left its main interest rate steady at what is said was a "stimulating" level that supports lending amid continued disinflationary pressures that has allowed monetary policy to support demand and ease the consequences of the coronavirus pandemic.
     The National Bank of Moldova's (NBM) executive committee unanimously maintained the base rate at 3.25 percent along with the the rate on loans and overnight deposits at 6.25 percent and 0.25 percent, respectively.
      NBM has lowered its policy rate twice this year by a total of 225 basis points, with the first cut on March 4 and then a second cut at an extraordinary meeting on March 20. On that day, it also lowered the reserve ratio on banks' domestic liabilities by 250 basis points.
       Since December 2019, when NBM cut its rate by 200 basis point, the rate has been lowered by 4.25 percentage points.
      The central bank said it was continuing to monitor the macroeconomic situation caused by the Covid-19 pandemic and would maintain sufficient liquidity in the banking system without compromising its fundamental objective of price stability.
     Currently, there is an increased degree of uncertainty regarding the magnitude of the crises created by the virus, the subsequent economic recovery, and the evolution of commodity and energy prices.
     Inflation in Moldova eased to 5.25 percent in April from 5.9 percent in March, the fourth month in a row of deceleration from 7.5 percent in December 2019.
       NBM targets inflation of 5.0 percent, plus/minus 1.5 percentage points..

     www.CentralBankNews.info

Moldova cuts rate another 100 bps amid risks from virus

     Moldova's central bank lowered its base rate by another 100 basis points to 4.50 percent to support aggregate supply in light of the "risks and uncertainties at global level determined by the repercussions of coronavirus in the global and regional economy."
     It is the first rate cut by the National Bank of Moldova (NBM) this year but the second cut since it shifted into an easing cycle in December 2019 following two rate hikes in June and July 2019 to lower inflationary pressures.
     NBM has now lowered its rate by 300 basis points since December 2019. It also cut the rate on overnight loans and deposits by 100 points to 7.5 percent and 1.5 percent, respectively.
     The central bank said the decision was taken as the expected disinflationary trend has been confirmed while the spread of the coronavirus, or COVID-19, is causing additional sources of disinflationary pressures on the consumer level.
     "At the same time, the uncertainty associated with coronavirus from the investment activity at global and regional level and a possible distortion of distribution channels could also affect the investment evolutions in the Republic of Moldova," NBM said.
     The central bank said it was monitoring the risks from the national and global economy and if necessary it would consider convening an extraordinary meeting on monetary policy, measures that have already been taken by other central banks.
     In January the central bank's executive committee left its rate steady, saying the new inflation forecast had confirmed the correctness of its rate cut in December.
     After rising for six months in a row, Moldova's inflation rate eased in January to 6.9 percent and NBM said in January the trajectory of inflation was downward and it may extend beyond the target range of plus/minus 1.5 percentage points at the beginning of this year.
      The NBM has a midpoint inflation target of 5.0 percent.

Moldova slashes rate 200 bps as inflation seen declining

     Moldova's central bank slashed its base rate by 200 basis points to 5.50 percent, noting the bank's governor, Octavian Armasu, in the latest inflation report had said monetary policy would have to be relaxed as inflation is expected to decline next year.
    It is the first rate cut by the National Bank of Moldova (BNM) since it raised its rate in June and July by a total of 100 basis points to lower inflationary pressures from rising aggregate demand.
    NBM added the rate cut was aimed at keeping inflation within the bank's target range of 5.0 percent, plus/minus 1.5 percentage points, the optimal rate to develop the national economy.
      Moldova's inflation rate has accelerated steadily this year from a combination of high demand from higher wages, pensions and consumer credit in the first half of 2019.
     In November inflation rose to 7.1 percent from 6.8 percent in October and 2.2 percent in January.

     A fall in the leu during first half of the year also boosted import prices but the two rate hikes helped changed the trend and since mid-June the leu has risen.

      The leu rose further today to trade at 17.3 to the U.S. dollar, up 5.2 percent since mid-June to be largely unchanged since the start of the year.
     In its November inflation report, the central bank forecast inflation would hit a maximum of 8.0 percent in the fourth quarter of this year and then decline continuously until the end of 2020 before stabilizing near its inflation target by the end of its forecast horizon.
    In the report it also said aggregate demand will remain pro-inflationary during this year and then become disinflationary starting in the first quarter of 2020 while real monetary conditions will remain restrictive during the entire forecast period.
     "Under the disinflationary conditions of 2020, the NBM decision will support the competitiveness of the economy and stimulate lending activity," the central bank said.
     In addition to lowering the base rate, BNM also cut the interest rate on loans and overnight deposits to 8.5 percent from 10.5 percent and to 2.5 percent from 4.5 percent, respectively.
     To encourage financial intermediation in the lei and discourage intermediation in foreign currencies, the central bank lowered the compulsory reserves in in lei and non-convertible currencies while it raised the ratio for freely convertible currencies.
     The gross domestic product of Moldova, between Ukraine and Romania, rose by an annual 5.8 percent in the second quarter of this year, despite political instability, and the World Bank has projected growth of 3.6 percent in 2020 and 38 percent in 2021 as growth in the country's trading partners strengthens.
      Last month Moldova's new prime minister raised the possibility of a pause in cooperation with the International Monetary Fund after the ex-Soviet republic said it was negotiating a $500 million loan with Russia.
     This indicated a possible pivot back toward Russia by the former-Soviet republic after the previous pro-Western government suffered a no-confidence vote five months after taking over.
     Moldova has received $157 million out of a 3-year  $183 million IMF program that expires in 2020, according to Reuters.
   
    www.CentralBankNews.info

Moldova raises rate 50 bps to curb inflationary pressure

     Moldova's central bank raised its base rate 50 basis points to 7.0 percent to curb rising inflationary pressures from higher wages and credit along with fiscal spending in 2019 and 2020.
     It is the first change in rates by the National Bank of Moldova (BNM) since the central bank wrapped up an easing cycle in December 2017 after cuts totaling 13 percentage points from February 2016, and the first rate hike since August 2015.
      In addition to raising the base rate, BNM raised the rate on overnight credit by 50 basis points to 10.0 percent and the overnight deposit rate by the same amount to 4.0 percent.
      The required reserve ratio on leu deposits and non-convertible currencies was maintained at 42.5 percent while the ratio on freely convertible currencies was raised 300 basis points to 17.0 to "discourage financial intermediation in foreign currency."
      The central bank said the rate increases were a first step toward mitigating inflationary expectations and pressures, and to stimulate savings, to keep inflation within the target range of 5.0 percent, plus/minus 1.5 percentage points, as data point to a significant increase in aggregate demand as outlined in the May inflation report.
      Moldova's inflation rate rose for the fifth consecutive month to 4.6 percent in May from 3.2 percent in April.
      In its May statement, BNM new loans by banks had risen 32.4 percent in the first quarter of this year from the same period last year as the weighted average interest rate on loans had decreased 1.25 percentage points in the same period.
      Moldova's leu has depreciated 5.5 percent against the U.S. dollar this year and was trading at 18.20 to the dollar today.

     www.CentralBankNews.info

     
     

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.

     www.CentralBankNews.info

Moldova holds rate as inflation to decelerate further

     Moldova's central bank left its base rate at 6.50 percent, along with its required reserve ratios, but said keeping the rate at the current level is conditional upon the short-term trend in inflation and disinflationary pressures that should persist during the remainder of this year.
     The National Bank of Moldova (NBM) has kept its rate steady since December 2017 but raised the reserve requirement for leu funds by 250 basis points to 42.50 percent in September to mop up excess liquidity.
     The latest policy decision by the board was based on updated inflation forecasts that sees inflation declining further to 1.9 percent by the end of this year from 2.4 percent in September, the lowest rate since December 2016 but a decline that was expected by the central bank.
     Inflation in Moldova has been easing due to modest demand, changes to electricity tariffs and the continued strength of the leu against the euro.
    Next year the trajectory of inflation will be upward, the NBM said, after which inflation will decline, with aggregate demand easing and thus being disinflationary.
     The latest forecast sees inflation averaging 3.3 percent this year and 5.4 percent in 2019, with inflation above the NBM's target range of 3.5 to 6.5 percent by the end of next year.
     By 2020 inflation will return to the target range.
     The leu has been appreciating against the euro since May 2016 and was trading at 19.1 to the euro today, up 7.3 percent this year.

      www.CentralBankNews.info

   
     

Moldova holds rate, raises reserve requirement 250 bps

      Moldova's central bank left its base rate steady at 6.50 percent but raised the reserve requirement for funds in domestic leu by 250 basis points to 42.50 percent to sterilize excess liquidity.
      The National Bank of Moldova (NBM), which has maintained its rate since cutting it in December last year, added the reserve requirement for funds in freely convertible currencies will be unchanged at 14.0 percent.
      Moldova's inflation rate eased to 3.0 percent in July from 3.2 percent in June and the central bank said the risk to its forecast stems from food prices that showed larger changes than expected.
     At the same time, prices for regulated goods and services, core inflation and fuel prices are in line with the forecast from August, NBM added.
      In August NBM forecast inflation would decline to below its target range of 3.5 to 6.5 percent (around a 5.0 percent midpoint) over the next three quarters to 1.9 percent by the fourth quarter of this year as regulated prices fall.
      From then on the inflation trajectory will reverse and return to its target range by the second quarter of 2019 and hit 6.5 percent in the third quarter of 2019. In the second half of next year the rise in regulated prices will exceed 10 percent.
     Moldava's leu has risen slightly this year despite the strength of the U.S. dollar and was trading at 16.7 to the dollar today, up 2.4 percent this year.

     www.CentralBankNews.info

     

Moldova maintains rate as inflation to decelerate further

      Moldova's central bank kept its benchmark base rate steady at 6.50 percent as inflation is expected to steadily decline during the rest of this year before the path reverses at the start of 2019 and inflation starts to rise on the back of higher oil prices, fiscal stimulus and the comparison to this year.
      The National Bank of Moldova (NBM), which has been in a neutral policy stance since December last year, added that aggregate demand is forecast to remain moderate for the next 8 quarters due to the current monetary conditions and fiscal policy.
      In an update to its inflation forecast, the NBM trimmed its forecast for inflation to average 3.2 percent this year, down from May's forecast of 3.3 percent and March's forecast of 3.7 percent, and then rise to average 4.9 percent in 2019, unchanged from the previous forecast.
      Moldova's inflation rate reversed course in June after five months of decline and rose to 3.2 percent from 2.8 percent but is expected to decline to an average of 2 percent in the fourth quarter.
      But in the first half of 2019 inflation is expected to rise and remain at the upper end of the central bank's target range of 5.0 percent, plus/minus 1.5 percentage points, until the end of the forecast horizon by the second quarter of 2020.
      The latest inflation report will be released on Aug. 3.
      Modova's leu has remained firm this year after rising sharply last year and was trading at 16.6 to the U.S. dollar today, up 2.9 percent this year.

      www.CentralBankNews.info

     
     

This week in monetary policy: Kazakhstan, Australia, Moldova, India, Poland, Serbia, Turkey and Peru

     This week - June 3 through June 9 - central banks from 8 countries or jurisdictions are scheduled to decide on monetary policy: Kazakhstan, Australia, Moldova, India, Poland, Serbia, Turkey and Peru.

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 23
JUNE 3 - JUN 9, 2018:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO	MSCI
KAZAKHSTAN	4-Jun	9.25%	-25	-100	10.50%	FM
AUSTRALIA	5-Jun	1.50%	0	0	1.50%	DM
MOLDOVA	5-Jun	6.50%	0	0	8.00%
INDIA	6-Jun	6.00%	0	0	6.25%	EM
POLAND	6-Jun	1.50%	0	0	1.50%	EM
SERBIA	7-Jun	3.00%	0	-50	4.00%	FM
TURKEY	7-Jun	16.50%	850	850	8.00%	EM
PERU	7-Jun	2.75%	0	-50	4.00%	EM

    www.CentralBankNews.info