The Executive Committee of the National Bank of Moldova (NBM) decided, by unanimous vote, to increase the rate applied to the main short-term monetary policy operations by 3 percentage points, to the level of 15.50 percent annually. Interest rates on overnight loans are also set at 17.50 per cent per annum and 13.50 per cent per annum on overnight deposits.
At the same time, for the period May 16, 2022 – June 15, 2022, it has planned to increase the norm of required reserves from the means attracted in Moldovan lei and in non-convertible currency by 2 percentage points, up to the level of 30.0% of the calculation base of, and for the norm of the obligatory reserves from the means attracted in freely convertible currency, it increases by 3%, up to 33.0%.
The decision is based on a new inflation forecast, which comes in the context of the effects of the pandemic crisis and the war in Ukraine, with a severe impact on the socio-economic situation in the Republic of Moldova, informs bani.md. The inflationary processes are caused by the increase in international prices for energy and food, but also the problems specific only to our country due to the dependence of local supply chains on economic agents in Ukraine.
The forecast shows that inflation will be higher and more persistent and requires more restrictive monetary policy measures, which will create the conditions for a return to equilibrium and potential economic growth. The decision is therefore aimed at easing inflationary pressures, anchoring inflationary expectations, protecting the population’s savings, in particular, stimulating the growth of bank deposit rates and, as a result, maintaining financial stability.
Primary inflationary shocks also cause side effects, especially through a significant adjustment in utility tariffs, especially where increase decisions have not been made in a timely manner.
In the context of the above, the National Bank of Moldova, like other central banks, including many countries with advanced economies, is resorting to tightening monetary policy measures. Those decisions are necessary to prevent the much more painful consequences in the future and to avoid the spread of poverty among the population. All the more so as the Republic of Moldova is a small country with an open economy, so it is vulnerable to a very strong impact from the outside.
The NBM will continue to carefully monitor the evolution of inflation components and factors likely to affect its dynamics, as well as the extraordinary risks and uncertainties caused by the war in the neighboring country. The National Bank of Moldova is ready, if necessary, to intervene with the necessary measures. At the same time, the NBM monitors the situation in the banking system of the Republic of Moldova, which is stable and viable, and foreign exchange reserves remain at a comfortable level to further ensure the financial stability of the Republic of Moldova. Also, on May 13, 2022, the second Inflation Report for the current year will be published.