June 28 (SeeNews) - Moldova's central bank decided to cut its base rate to 6% from 10%, aiming to bring inflation back within its target band of 3.5%-6.5% and hold it there over the medium term.
Interest rates on overnight loans and deposits also decreased by 4 percentage points - to 8% and 4% per annum, respectively, the central bank, BNM, said in a press release last week.
The rate cut is aimed at supporting the balancing of the national economy by creating monetary conditions to boost lending in the context of decreasing related costs while stimulating consumption and boosting aggregate consumption.
This is the fifth cut in the BNM's key rate since August, when it stood at 21.5% - the highest level since 2001.
Moldova's annual inflation slowed down to 16.3% in May from 18.1% a month earlier, sitting 0.6 percentage points above the expected value. The deviation from the forecast was mainly driven by the regulated prices and food prices, which increased at higher than anticipated annual rates of 46.1% and 13%, respectively.
Moldova's economy contracted by an annual 2.4% in real terms in the first quarter of 2023, generating disinflationary pressures from aggregate demand in that period.
Uncertainties with regard to the inflation outlook in the short and medium term revolve around the regional geopolitical context and potential escalations, as well as the volatility of energy prices and the way in which tariffs for utilities are adjusted. Inflationary uncertainties also hinge upon Moldova's agricultural production during 2023 and 2024.
The BNM's executive board will hold its next monetary policy meeting on August 9.
(1 Moldovan leu=19.9305 euro)