The National Bank of Moldova (NBM) raised the base refinancing rate by another 1 percentage point - from 3.65% to 4.65% per annum.
The NBM Executive Committee adopted the corresponding decision at a meeting on monetary policy late in the evening on September 3 in order to mitigate risks and pro-inflationary pressures. According to the National Bank, in particular, it increased the base rate applied to main operations of short-term monetary policy by 1 percentage point - from 3.65% to 4.65% per annum, and also increased by 1 percentage point interest rates on overnight loans and deposits - from 6.15% to 7.15% and from 1.15% to 2.15%, respectively. At the same time, the National Bank did not change the rate of required reserves from funds attracted in Moldovan lei (MDL) and in non-convertible currency, as well as the rate of required reserves from funds attracted in freely convertible currency, leaving them at the same level, 26% and 30% of the calculated base, respectively. The NBM's decision was adopted taking into account inflationary pressures from aggregate supply and demand, as well as risks and uncertainties caused by the evolution of the pandemic. The NBM Executive Committee came to the conclusion that the risk of persisting inflationary process prevails for the first half of the forecast horizon. According to the NBM estimates, inflationary pressure from the demand side will continue in the next period, which will be facilitated by an increase in household income (wage fund, social assistance, remittances, etc.) and an increase in the volume of consumer and mortgage loans in the context of stimulating monetary conditions that support consumption through savings. As noted by the Central Bank, thus, the decision of the NBM is aimed at mitigating inflationary pressures caused by the acceleration of aggregate domestic demand, fueled by consumption growth, as well as mitigating the secondary effects of supply shocks amid rising international prices and import inflation. The National Bank of Moldova announced that it will continue to closely monitor external and internal risks associated with the inflationary process and the development of the global and national economy, and will take the necessary monetary policy measures in due course. According to the schedule, the NBM’s next meeting on monetary policy will be held on October 29 this year. It should be noted that the National Bank of Moldova changed the last time the base rate applied to main short-term operations of monetary policy on July 30, 2021, when it was also increased by 1 percentage point - from 2.65% to 3.65% per annum. At the same time, the National Bank also increased by 1 percentage point the interest rates on overnight loans and deposits - from 5.15% to 6.15% and from 0.15% to 1.15%, respectively. Prior to that, the National Bank of Moldova changed the base refinancing rate on November 6, 2020, when it was reduced by 0.1 percentage point - from 2.75% to 2.65% and then reached its record all-time low. In general, the NBM in 2020 gradually reduced the base rate applied to main short-term operations of monetary policy from 5.5% to 2.65% per annum; the interest rate on overnight loans was reduced from 8.5% to 5.15%, and on overnight deposits - from 2.5% - to 0.15%. In particular, the base rate applied to main short-term operations of monetary policy on March 4 of this year was reduced by 1 percentage point (pp) - from 5.5% to 4.5% per annum, on March 20 - by 1.25 pp - from 4.5% to 3.25% per annum, on August 6 - by 0.25 pp - from 3.25% to 3% per annum, on September 9 - by another 0.25 pp - from 3% - to 2.75% per annum, and on November 6 - by 0.1 pp - from 2.75% - to 2.65% per annum. //03.09.2021 - InfoMarket.
