Financial News: Moldova Hikes Rates Again As Inflation Surged Amid

Moldova Hikes Rates Again As Inflation Surged Amid Energy Crisis

02/05/2025 - 16:24:00 (RTTNews)

(RTTNews) - Moldova's central bank raised its key interest rate for a second policy session in a row as the economy reels under the pressure rising inflation triggered by an energy crisis.

The Executive Board of the National Bank of Moldova on Wednesday unanimously hiked the base rate by 90 basis points to 6.50 percent. This followed a massive 200 basis point raise in an unscheduled meeting in January as inflation spiraled to 7 percent in December. The country plunged into a severe energy crisis after Russia's Gazprom stopped gas supplies to Transnistria, a breakaway region of Moldova, on December 31. This was after Ukraine refused to renew an agreement that allowed the transit of Russian natural gas supplies to Transnistria through the country.

Most part of Moldova's electricity needs were being met by power production in Transnistria that benefited from free gas supplies from Russia.

The central bank said the latest hike was decided after the energy crisis relief package of over EUR 300 million agreed between the EU and the Moldovan government on Tuesday. This support package also aims to mitigate the impact of the adjustment of electricity and natural gas tariffs on consumer prices, the bank observed.

Further, the bank attributed the latest hike to the need to mitigate the second-round effects caused by the change in regulated tariffs in December 2024 and January 2025 on inflation. The move is also aimed to anchor inflation expectations and to bring inflation within ±1.5 percentage points from 5.0 percent target within a reasonable timeframe.

Increasing uncertainties regarding the developments of the world economy and trade flows in the current global context also was a consideration for the rate hike, the bank said.

The central bank modified its schedule for publication of Inflation Reports this year as it has to preparate a medium-term inflation forecast that covers the EU support to the country to reduce the impact of the increase in regulated tariffs. Consequently, the next Inflation Report is scheduled to be published on February 25.

The next rate-setting session is due on March 20.

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