The base rate applied to the main monetary policy operations remains at the same level of 7.5%. A decision in this regard was adopted today, September 11, by the Executive Committee of the National Bank of Moldova. According to the decision, the values of other monetary policy instruments will remain unchanged. Thus, the interest rates on overnight loans will continue to be 10.5% annually and 4.5% annually for overnight deposits.
BNM Governor Octavian Armașu said that the decision was made following the evaluation of the latest macroeconomic data. "We can see that the inflation rate is in the target corridor for the fourth month in a row. For August, the inflation rate is 5.5%, which is above the surface. If we go deeper, we see that by the end of the year we will have higher inflationary pressures. Thus, our previous forecast remains valid, which means that by the end of the year, we will probably exit the corridor and the inflation rate will be higher than the inflation target rate. This trend may even continue in the first months of next year”, the governor explained.
According to Octavian Armașu, the same pro-inflationary factors remain valid. "In contrast to our previous evaluations, we are now seeing external factors that could temper the aggregate demand here, in Moldova, as a consequence, we will have a disinflationary effect next year. We are talking about that trade war between the United States and China, Brexit and other phenomena that are taking place, which are likely to generate global economic downturns that will affect our main partners - the European Union and other countries. Probably these things will also affect our demand by reducing remittances, while our exports volume may possible drop. This is what we anticipate next year”, said Octavian Armașu.
The governor said that, according to estimates, no new impulses are expected for next year and there will probably not be a new payroll increase, as it was this year. As a result, there will be less inflationary impulses. Therefore, next year's inflation rate may be lower than expected in the latest forecast. "We keep the rate as it is. We will closely monitor the evolution of prices, economic factors, then will see what decision will follow at the next monetary policy session”, the governor said.
According to forecasts, by the end of the year, the inflation rate will increase to 8%. The forecast included the increase in electricity tariffs in October. Food prices so far have been slightly lower compared to forecasts, but most likely they will exceed the forecast, due to the drought. The forecast is shaped by both internal and external factors. "We believe that our forecast is true for the final period of the year and for the beginning of next year", said Octavian Armașu.
At the meeting on July 31, the Executive Committee of the National Bank of Moldova decided to increase by 0.5 percentage points, up to 7.5%, the base interest rate applied to the main short-term monetary policy operations.
