The Central Bank of the Republic of Moldova is preparing for a 20% inflation in 2022 with a further increase in interest rates, reaching the reference rate of 10.5%. Moldova has already declared a state of emergency and a search to help its citizens cope with rising energy prices.
In the Republic of Moldova, vegetables became 60% more expensive than last year. 16% bread. Inflation is heading for 20%. The central bank sought to stop the rise in interest rates by pushing interest rates above 10%. This means eroding living standards in the largest European state, now also involved in the Ukrainian crisis.
In the face of an inflation rate expected to exceed 20% annually in the middle of this year and a core inflation (not including food and energy prices) of over 15% annually, the central bank of the Republic of Moldova has increased its interest rate reference by two percentage points up to 10.5%, this being the last in a series of interest rate increases initiated in the middle of last year, writes Intellinews.
The monetary policy decision is aimed at moderating credit growth at the expense of rising associated costs, stimulating savings at the expense of immediate consumption and reducing pressure on the depreciation of the national currency amid rising current account deficits and trade balance, the country’s central bank said.
With this decision, the bank is trying to reduce the persistent pressures. This strengthens the anti-inflationary position.
The country’s statistics bureau recently announced that the overall inflation rate accelerated to 16.6% in January in annual terms, from 13.9% in December.
The main driver of inflation was food prices, which rose by 21.5%. On average, in January 2022 compared to January 2021, vegetables became almost 60% more expensive, eggs by 36%. Bread has become 16% more expensive, and meat, fruits and dairy products on average by 15%.
In January 2022, compared to December 2021, prices increased especially in food: vegetables, by 16.9%, fresh fruit, by 7.2%, potatoes, by 6.5%, flour by 3.5 %, eggs with 2.7%, sugar with 2.0%, wheat flour bread with 1.7%, meat, meat preparations and preserves with 1.6%, according to the National Bureau of Statistics of the Republic of Moldova.
Non-food prices rose by 13.4%, while service costs rose by 14.8% annually.
The regulated price of electricity is expected to rise, amplifying the inflationary impact of the dramatic rise in gas prices.
At the end of January, Moldova approved a 34% increase in the price of gas for households in order to keep up with the payments of its dominant supplier, the Russian giant Gazprom, which threatened to suspend deliveries, according to Reuters.
Moldova has already declared a state of emergency, amended its budget and redirected funds to help citizens cope with rising energy prices to pay Gazprom, which has raised prices and refused to postpone advance payments. The latest central bank inflation report indicates expectations of general inflation to rise above 20% in the second half.