Moldova raises rate 50 bps to curb inflationary pressure20th June 2019
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.
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