The NBM kept the base rate applied to the main short-term monetary policy operations at the same level of 4.75% per annum.
This decision was made by the NBM Executive Committee at a meeting on December 14. The National Bank also left unchanged interest rates on loans and overnight deposits at 6.75% and 2.75% per annum, respectively. As the National Bank notes, its decision is aimed at maintaining monetary conditions to further stimulate aggregate demand, including by stimulating consumption, balancing the national economy and consolidating inflation expectations. The NBM emphasized that it is closely monitoring the inflation process, assessing the risks and uncertainties associated with it, and future decisions of the Executive Board will depend on the updated inflation forecast. The NBM drew attention to the fact that new macroeconomic information largely confirms the validity of the National Bank’s latest forecast. Annual inflation fell within the target range to 5.5% in November, slightly lower than expected. The deviation was mainly due to regulated prices and food prices. The restrictive monetary policy measures adopted by the NBM, in turn, over the 1.5 years until the end of last year, contributed to a significant reduction in inflation. Regarding the external environment, the NBM noted that in countries with developed economies, inflationary pressure has weakened and annual inflation is approaching target levels. The eurozone economy stagnated in the third quarter, on the verge of recession, due to the energy crisis and tightening monetary policy. Oil prices continued to fall due to weak demand and increased supply from non-OPEC countries, despite OPEC+ recent decision to cut production. Natural gas prices have stabilized in recent months, while commodity prices generally continue to decline. Regarding economic activity in our country, the National Bank noted that the latest data confirms expectations for economic activity in the third quarter of 2023. In September, imports and net transfers to resident individuals decreased by 17% and 18.3%, respectively, year on year. Social benefits fell by 13.8% year-on-year in October, mainly due to the base effect. The wage fund in the third quarter of 2023 grew in real terms by only 6.2%, compared to the same period in 2022. Thus, domestic demand remains weak. On the other hand, exports, wholesale trade, retail trade and industry increased. As noted by the NBM, interest rates on new loans and deposits in lei also decreased in November as a result of the cumulative stimulus of monetary policy. According to operational data, the weighted average rate on deposits in lei was 4.3%, and on loans – 10.58%, decreasing compared to November 2022 by 9.31 and 3.62 percentage points, respectively. The decrease in rates led to an increase in the volume of new loans in lei and a decrease in deposits. Interest rates on loans and deposits in foreign currency had different dynamics: for loans they continued to grow, and for deposits they decreased. The NBM emphasizes that the balance of risks for the inflation forecast is balanced with a slight pro-inflationary bias in the short term. Uncertainties remain pronounced. The main sources are the tense situation in the region and the Middle East, adjustments in energy tariffs and the reflection of compensation for them in statistics, growth in external costs, which will have a delayed effect on internal ones, updating of tariffs for medical services, which continue to cause significant pressure for several years. Interest rates are expected to be cut in advanced economies as inflation pressures ease and inflation approaches target levels. Low volatility in prices for raw materials and energy resources is expected. The next meeting of the NBM on monetary policy will take place on February 6, 2024, as scheduled. It should be noted that at its last meeting on November 7, the NBM Executive Committee reduced the base rate applied to the main short-term monetary policy operations from 6% to 4.75% per annum. // 14.12.2023 — InfoMarket.
