Central bank explains recent moves on currency market

“The National Bank (of Moldova, NBM) is closely controlling the developments on currency market and is ready for prompt and determined actions, in the event of significant fluctuations of the exchange rate that could lead to an excessive growth in inflation rate. The NBM possesses sufficient monetary levers to ensure that annual inflation rate in the period 2010/2012 does not exceed 5 percent”, the central bank said Friday in a press release, quoted by Info-Prim Neo. The press release appeared in response to questions concerning the domestic purchases of U.S. dollars carried out recently by the central bank, a move which appeared to weaken the national currency. In its release, the NBM recalls that its “key role is to make sure that prices remain stable”. “The National Bank is carefully analyzing the recent developments on the domestic market in the context of the impact that the exchange rate has on price stability. Analysis has shown that price stability in Moldova is consistent with an inflation rate of 5 percent in the long run. Taking into account the deflation registered lately, the NBM is using this opportunity to strengthen its foreign currency reserves by actively purchasing surplus foreign currencies from the market, thus ensuring Moldova's economic stability in the future”, the central bank explains. The National Bank also says that, amid limited economic activity and deflation, the necessity has appeared to make a more forceful move to support the general economic policy of the government, aiding at the same time the national financial system. Besides advantaging the domestic producers though making their products more competitive externally, the recent moves will help to enhance the liquidity of the national economy, including by increasing availability of loans for the real sector, without impairing the central bank's fundamental objective.