NBM’s 2008 monetary & currency policy aims to ensure one-digit inflation

This year, the monetary and foreign exchange policy of the National Bank of Moldova (NBM) will focus on achieving and maintaining a one-digit inflation rate, Info-Prim Neo learned from NBM’s Strategy and Objectives for monetary and foreign exchange policy. NBM’s monetary and foreign exchange policy for 2008 will be based on the following assumptions and expectations: GDP will increase by 6 percent in real terms; the growth pace of the monetary aggregates will be kept under last year’s level; the upward trend of foreign currency inflows into the country will be maintained; the balance of trade in goods and services will improve due to the increase in exports at an accelerated pace; inflation expectations will be gradually reduced. The NBM will continue to follow the Action Plan on the implementation of the Strategy for Inflation Targeting and Rate Policy by employing the ‘corridor’ overnight rate, where the highest interest rate is charged on overnight loans, while the lowest on overnight deposits. In 2008, the NBM will seek to narrow this ‘corridor’. Over Q1-08, the NBM and the Ministry of Finance will convert the loans previously taken from the NBM worth 1.8 billion lei into state securities. This year, the NBM will further maintain a floating exchange rate regime and will set the official exchange rate of the Moldovan leu against the US dollar based on the leading exchange rates in the domestic foreign exchange market. In the period January-November 2007, the cumulative inflation amounted to 12.1 percent; prices of foodstuff products rose by 13.8 percent, of non-foodstuff products by 10.7 percent, and of services provided to the population by 12.8 percent. The main causes of the amplified inflation in 2007 are associated with monetary factors (the increase in the money supplies M2 and M3), as well as non-monetary factors like the effects of last summer’s drought; hikes in prices of electrical power, natural gas, sewer and water, and a nearly 60 percent boost in world prices of petroleum products.