CHISINAU (Moldova), June 3 (SeeNews) – The central bank of Moldova has decided to raise its key rate to 18.5% from 15.5% in order to temper the rise in consumer prices and mitigate the risks associated to the war in Ukraine, she said on Friday.

Interest rates on overnight loans and deposits will also increase by 3 percentage points – to 20.5% and 16.5% per annum, respectively, the central bank BNM said in a press release.

This is the highest level of the policy rate in six years, data published on the BNM’s website showed. From September 2015 to January 2016, the rate was 19.5%.

The decision aims to limit the effects of a second round of external shocks on prices, by balancing aggregate demand, stimulating savings relative to immediate consumption and alleviating pressures on the depreciation of the national currency due to rising current account deficits and the ebb of capital, the BNM said.

According to BNM, regional and global economic conditions remain affected by risks and uncertainties related to the tense situation created by the war in Ukraine. Inflation rose globally at an accelerating pace, driven mainly by continued growth in international commodity, food and energy resource quotations, as well as disruptions in supply chains, generation and transmission, the central bank noted.

Under these circumstances, the central banks revised their inflation forecasts upwards for the coming quarters and consequently maintained an anti-inflationary monetary policy.

“The regional and international context unbalances the domestic macroeconomic situation and exerts pressure on inflation through the channel of imports. Compared to other states, the Republic of Moldova is increasingly dependent on quotations and the evolution international markets, making it even more vulnerable to price shocks,” the BNM said.

Moldova’s consumer prices hit a 23-year high of 27.07% year-on-year in April, compared with an annual increase of 22.16% the previous month, according to the latest data from the National Bureau of Statistics.

The central bank’s executive board will hold its next monetary policy meeting on August 8.

(1 euro = 20.3571 Moldovan lei)

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