There is an imminent likelihood of the annual inflation rate to exceed the ±1.5 point margin above the 5% per annum target set for the fourth quarter of this year, warns the National Bank of Moldova. For this reason, it says, some restrictive monetary measures are necessary in the immediate future.

According to the National Bank, annual inflation was 3.5% as of July, a 0.3 point increase on June.

CPI rose last month, a first for the month of July since 2012, amid rising food prices globally and also because of a delay of seasonal disinflationary factors usually associated with the harvest of fruits and vegetables.

Inflation was also influenced by higher-than-expected inflationary pressures from the aggregated domestic demand due to a rebound of population consumption on an increase in salaries, loans and remittances. Higher customs revenues from imports of consumer goods as well larger amounts of cash in circulation attest to this increase in demand.

At the same time, increased pressure related with supply caused a rise in some raw material prices that impacted inflation. Construction materials in particular rose globally, amid an economic rebound following a relaxation of coronavirus instructions. Global cotton and timber prices rose as well.

Inflation in July was also driven by higher university tuition fees and an update of fees by the Public Services Agency.

The impact of fuel prices in July was less significant due to the introduction of a new price-capping methodology. Still, fuel prices remained higher than in the similar period last year, by 17.1%.

In these circumstances, says the National Bank, inflation processes will persist. Increased inflationary pressures from aggregate domestic and external demand, amid stimulatory monetary conditions, inflation expectations, rising global commodity prices, high levels of global food and oil prices, coupled with an increase in external financing and an anticipated stronger fiscal momentum, will continue to influence consumer prices.