Moldova's c-bank cuts key rate to 3.75%

Interest rates on overnight loans and deposits also decreased by 0.5 percentage points - to 5.75% and 1.75% per annum, respectively, the central bank, BNM, said in a press release on Thursday.

The rate cut is aimed at further stimulating aggregate demand, including by encouraging consumption, balancing the national economy, and anchoring inflationary expectations.

This is the eighth cut in the BNM's policy rate since August 2022 when it stood at 21.5% - the highest level since 2001.

Moldova's annual inflation eased to 4.2% in February from 4.6% a month earlier, marking its fifth month within the BNM's target range. Price decreases on the international food market, statistical effects and diminished demand were among the main drivers of the disinflationary trend. Moldova's loosening of its monetary policy along with positive seasonal effects and adverse sectoral shocks are seen to have slowed down the disinflationary trend, the central bank said.

Moldova's economy inched up by an annual 0.2% in the fourth quarter of 2023, with a rich harvest leading to an increase in agri-food exports, and driving most of the modest growth.

The central bank expects inflation to ease further, with significant uncertainties arising from factors like the Middle East conflict, tariff adjustments for energy resources, and related compensations. Uncertainties within the region lead to pessimistic outlooks among both businesses and the wider population, potentially limiting consumption and internal investments.

The BNM's executive board will hold its next monetary policy meeting on May 7.

(1 euro=19.3481 Moldovan lei)