National Bank of Moldova hikes refinancing rate to 5.6% due to rising energy prices

CHISINAU. Jan 13 (Interfax) - The Executive Board of the National Bank of Moldova has raised the refinancing rate from 3.6% to 5.6% per annum at an extraordinary meeting, amid rising inflation risks due to increased energy tariffs, the bank said in a statement.

Interest rates on overnight loans were also raised by 2 percentage points from 5.6% to 7.6% per annum, while rates on overnight deposits increased from 1.6% to 3.6% and repo operations from 3.85% to 5.85% per annum.

The rate hike is linked to "external and internal factors, particularly the prospect of accelerating inflation due to increased domestic tariffs for piped gas, thermal energy and electricity, which were adjusted in December 2024 and January 2025," the bank said.

The sharp rise in energy prices has intensified inflationary pressures, and inflation is expected to exceed the target range (plus-minus 1.5 percentage points from the inflation target of 5%) for several quarters of 2025, the National Bank said.

The rate hike should thus "return the annual consumer price level to the deviation corridor from the inflation target within a reasonable period," it said.

Annual inflation in December 2024 rose to 6.97%, which is 1.6 percentage points higher than the previous month and above the upper boundary of the inflation target. This was driven by a 27.6% increase in gas prices in December. "The main factor influencing this inflationary dynamic is the cessation of natural gas supplies through Ukraine after December 31, 2024. As a result, Moldova is meeting electricity needs through domestic sources and imports at prices that have fueled inflation. In addition, recent tariff adjustments for piped gas and thermal energy will lead to higher prices for related goods and services," it said.

The next meeting of the National Bank on monetary policy issues will take place on February 5, 2025, as previously scheduled.

On December 5, 2024, the National Bank kept the refinancing rate at 3.6% per annum for the third time in a row.

The bank also maintained the base rate at 3.6% per annum at previous meetings on November 5 and September 19. The last change to the base rate was on May 7, when the regulator lowered it by 0.15 percentage points, from 3.75% to 3.6% per annum. Prior to that, the National Bank reduced the rate twice last year - from 4.75% to 4.25% on February 6 and to 3.75% on March 21.