National Bank takes measures to stop inflation dynamics

The National Bank’s (BNM) Council of Administration has decided to keep the base rate of BNM, applied on commercial banks’ refinancing through SS two-month acquisition Repos conducted within NBM open market operations, at the level of 12.5% per year. BNM has made this decision, at its meeting of June 22, taking into account the inflation dynamics and the present condition of the currency market. At the same time, interest rates in rates corridor have been set as follows: for overnight credits – 17% annually, increased by 2 percentage points; for Lombard facility – 15% per year, increased by 1 p.p.; for overnight deposits, accepted by BNM from commercial banks – 2% per year. The base rate on long-term credits (over 5 years) has been set at the level of 10.5% per year. The decision of the Council of Administration on interest rates shall enter into force on the date of its publication in the Official Monitor of the Republic of Moldova. The director of the informational Agency “Financial Brains”, dr. Sveatoslav Mihalache, has declared for Info-Prim Neo that increasing the interest rates for overnight credits by 2 points, BMN is trying to diminish the currency amount and to stop the inflation dynamics. Through the rates policy, BNM is utilizing the corridor method: the highest rate is applied on overnight credits, offered to commercial banks, and the lowest – on overnight deposits of the commercial banks, the expert added. Through its currency policy BNM is trying to maintain the liquidity in the banking system and is searching for an optimal level, Mr. Mihalache says. According to him, besides its surveillance task, BNM offers credits to commercial banks, because there is no possibility to directly provide with credits the economic agents. Thus, increasing the rates for BNM credits leads to raising the interest rates for the credits offered by commercial banks to economic units, fact that eventually diminishes the inflation process. The overnight credit is given to commercial banks for increasing currency liquidities and is offered for the shortest period possible – one day. The banks have to repay the second day this credit, and in addition a 17% interest rate, divided into 360 banking days, i.e. 0,047%. As regards to the refinancing base of 12,5, Mr. Mihalache says it is the same as in 2005. The inflation dynamics registered at present in RM doesn’t constitute a crisis factor, mentioning that not only Moldova faces inflation; it is registered over the world, even in USA and EU, fact triggered by the increase in price for oil, which eventually influences in a chain reaction the prices for the most of consumer goods.