Governor Armasu about inflation in Moldova and Leu appreciation

The NBM (National Bank of Moldova) anticipates a further reduction in credit interest rates and considers that the maintained basic refinancing rate at 6% per annum is appropriate to the current situation as of August 14, 2023. This statement was made by the Governor of the National Bank of Moldova in response to a question from the InfoMarket agency during the Economic Press Club, following the presentation of the NBM’s third inflation report of the year.

He reminded me that during the last monetary policy meeting, the NBM kept the basic rate applied to key short-term monetary policy operations at 6% per annum, which is significantly lower than the interest rates on existing loans in the market. Octavian Armașu emphasized that only certain banking products currently have lending rates below 10%.

“Generally, these remain around 10% per annum and should continue to decrease. The adjustment of interest rates in the market is a gradual process. It does not happen overnight. There needs to be a change in deposit rates to ensure the cost of financing by banks, after which banks can proceed with reducing loan interest rates. We observe that, in the current context, the trend of decreasing interest rates continues, and the previous monetary policy decisions of the NBM are taking effect. We believe that the current basic rate applied to key short-term monetary policy operations, at the level of 6% per annum, is appropriate to the current situation. We set this rate based on our inflation forecasts,” stated the head of the National Bank.


Responding to another question from journalists about whether it is a good time for citizens to take out mortgage loans due to lower interest rates, Octavian Armașu mentioned that mortgage loan rates adjust according to the market situation, and today there are some banks offering them at a rate below 10% per annum.

“This trend of decreasing rates will continue. I encourage citizens to monitor rate developments and make appropriate decisions based on their intentions to purchase a home and take out loans. Perhaps the real estate market will also react to this reduction in interest rates. Consequently, a balance between risks will need to be found,” stated the head of the National Bank.

The Moldovan leu has been experiencing continuous appreciation in recent times. Since the beginning of August, the national currency has appreciated by 2.1% against the euro and by 1.7% compared to the US dollar.

BNM Governor Octavian Armașu maintains that the leu has become stronger against benchmark currencies due to a higher supply compared to demand.

“There are periods when the situation reverses, such as when banks pay dividends, as well as companies and when energy operators conduct large transactions. In general, there is an imbalance in the market due to an excess of currency. Primarily, this is due to low demand for imports due to weak domestic demand, which reflects in reduced currency demand. In this situation, there is pressure on the exchange rate. BNM intervenes, procuring the excess to ensure a level of volatility and to avoid day-to-day changes in the exchange rate. However, we cannot oppose the trend. If the consumption situation normalizes and imports increase, then we might see a reversal of things in order to support our exporters,” Armașu emphasized.

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