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Oct 01, 2007 17:15 EEST
(adds reason for the rate hike)</p>CHISINAU
October 1 (SeeNews) - Moldova's central bank, BNM, said on Monday it has raised the key interest rate it uses in repo deals with commercial banks to 16% from 13.5% over concerns of accelerating inflation.
"The base rate increase was due to the BNM concern related to maintaining of the inflation indicator within the limit of 10% by the end of the current year," BNM said in a statement.
A drought that hit mainly agricultural Moldova earlier this year has caused an substantial rise in food prices in the first half, contributing to a considerable growth of inflationary expectations, the BNM said.
Moldova's August consumer prices rose by 2.2% month-on-month after growing by a monthly 1.1% in July. Year-on-year, consumer price inflation quickened to 13.5% in August from 12% in July. Cumulative inflation for the first eight months of 2007 was 7.3% versus 7.9% a year earlier.
Moldova has forecast a 10% inflation for this year.
"Essential foreign currency inflows recorded this year forced the central bank intensify foreign currency acquisitions that led to the increase, over the programmed level, of several monetary indicators," BNM added.
Moldova's M1 money supply rose by 21.7% on the year to some 9.36 billion lei ($828 million/582 million euro) at the end of August. M2 money supply totalled 15.4 billion lei at the end of August, up 35.1% from a year earlier.
BNM projects a 20% rise in the country's M2 in 2007.
BNM also said it raised the rate on overnight loans to 18% from 17%. The central bank left unchanged the rate on overnight interbank deposits at 2.0%. The rate on long-term loans with maturity of more than five years also remained unchanged at 10.5%.
BNM last changed its key rate in April, lowering it by one percentage point from 14.5%.
(1 euro= 16.0972 Moldovan lei)
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