Central bank cuts base rate by two percentage points

The base rate on the main short-term monetary policy operations was reduced by two percentage points to 5.5%. The decision taken by the National Bank of Moldova’s Executive Board is aimed at maintaining inflation in the variation interval of the inflation target of 5%, which is the optimal level for developing the national economy, IPN reports.

National Bank governor Octavian Armașu told a news conference that this monetary policy decision was reached following the publication of the inflation report at the end of October. The report said the inflation rate in 2020 is expected to be lower than in 2019, when food prices rose owing to the seasonal factor, the weather and the developments on the international market. The inflation rate was rather high, reaching 7.1% at end-November. This is expected to further rise slightly in December.

The National Bank will have to adjust its policies and relax them as the inflation next year is projected to decline. In the disinflation conditions of 2020, the Bank will support the economy’s competitiveness and will stimulate lending.

“Given that the import price of gas was revised, we do not expect significant changes in the regulated prices, I mean tariffs. This means there won’t be inflationist shocks in this regard. Also, foreign experts forecast the food prices in 2020 will rise modestly, not as in 2019, when they increased consistently,” stated Octavian Armașu.

The governor also said the Executive Committee decided to cut the interest rates on overnight loans and deposits to 8.5% and, respectively, 2.5% a year. The norm of mandatory reserves attracted in Moldova lei and nonconvertible currency was reduced, while the norm of mandatory reserves from freely convertible currency was increased. This will encourage financial intermediation in the national currency and, respectively, will discourage that in foreign currency.

The Executive Board’s next meeting centering on the monetary policy was scheduled for January 29, 2020.

  • Octavian Armasu despre Rata
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