Inflation in Moldova will return to the target corridor in Q4 2023, and the NBM’s monetary policy will be focused on maintaining inflation in this corridor - Octavian Armasu.
This was stated by the Governor of the National Bank of Moldova during a recent media interview on the "Give Sense to Money" podcast. He noted that the biggest challenge the NBM sees is that the recession is deeper than the National Bank expected. "That is, the rate of decline in inflation is somewhat higher than, say, our previous forecast that we made at the beginning of the year, and that prompts us to respond with earlier monetary policy easing to support the economic recovery. This rapid decline in inflation, faster than we expected, is due to this deep recession, because demand is very weak, and we have to revive it, so we do everything possible with monetary policy instruments," the NBM Governor stressed. He drew attention to the fact that both in the period of rising and falling inflation the monetary policy can only direct the processes in the right direction. "But it is very important that the monetary policy is supported by the appropriate fiscal policy. I'm talking about countercyclical fiscal policy, because procyclical fiscal policy only makes things worse. That's why we are constantly advocating a permanent dialogue with the government to link these two policies and achieve goals related not only to inflation but also to economic activity and the interests of citizens," said the head of the National Bank. While asked why commercial banks are in no hurry to lower interest rates on loans, given that the National Bank has reduced the base rate applied on main short-term monetary policy operations to 10% per annum, Octavian Armasu explained that monetary transmission is always delayed. "This is a phenomenon that we observe, so the reaction to the base rate easing comes with some delay. It goes to deposit rates first and it's very noticeable, and after that there's a delay in the credit rate reduction. What we are seeing is that in April and May the lending rates started to go down, we hope that they will go down even more, because eventually they will reach the right level, and low lending rates will support the economic recovery," the NBM Governor said. // 08.06.2023 – InfoMarket
