Consumer price inflation in Moldova (chart) eased to 5.5% y/y in November, from 6.3% y/y in October, as the prices increased by less than 0.2% m/m according to the statistics bureau BNS.

Headline inflation in Moldova entered the inflation targeting band of 5% +/-1.5pp in November for the first time since August 2021, after peaking at 34% y/y for three consecutive months last summer.

Moldova’s authorities expect steady 5% inflation for December and the years to come.

The prices of electricity, natural gas and heating decreased by 5%, 6% and 18% respectively in November as the government resumed the disbursement of subsidies to households during the cold season.

On an annual basis, however, the prices of natural gas and heating increased by 14% y/y and 37% y/y while the price of electricity (-34% y/y) is still low thanks to the affordable electricity supplied by the gas-fired plant in the breakaway Transnistria (which burns natural gas received for free from Gazprom).

The National Bank of Moldova (BNM) slashed the monetary policy rate by 125bp to 4.75% on November 7, marking an ambitious and perhaps final step of the monetary cycle that has been particularly hawkish with the policy rate reaching 21.5% during August-December last year.

The impact the BNM’s committed policy last year made on aggregate demand and financial intermediation was particularly strong, subsequently impacting the overall economic growth that plunged this year to -2.3% y/y in H1.

On the upside, the country’s economy seems to have successfully accommodated higher energy prices, which are now more in line with the market, compared to the politically-subsidised prices provided by Russia.