Moldova’s inflation steady at 7.3% y/y in August, core inflation eases

Moldova’s inflation steady at 7.3% y/y in August, core inflation eases
By Iulian Ernst in Bucharest September 12, 2017

The consumer price index in Moldova increased by 7.3% y/y in August, the same rate as in July, the statistics office reported on September 11. Detailed data confirm the appropriateness of the interest rate cut made by the central bank on August 28.

The monetary policy remains, however, rather restrictive in the light of the 40% required reserves ratio for local currency liabilities. Possibly the monetary authority wants to see the broad range of reforms (regulatory reforms and supervisory tightening) completed before stimulating lending on healthy grounds.

Core inflation returned to the disinflation trend in August, in line with the absence of demand-side inflationary factors mentioned by the central bank in its latest monetary policy note. The prices of consumer goods other than food and beverages, fuels and other administered prices, increased by only 4.8% y/y in the month (core inflation), furthermore easing from 5.0% y/y in July. The inflationary pressures seen earlier in the year were caused by supply-side factors (weak vegetable production) and rising administered prices.

Indeed, the prices of food keep keep rising above average (on an annual basis) despite slightly easing to 8.4% y/y in August from around 9% y/y in April-May. But the prices of vegetables have been particularly high this year amid adverse weather: 21% up y/y in August (compared to as much as 33.5% up y/y in June). Potatoes’ prices were also an impressive 38.5% up y/y in August (from +51% y/y in July).  

The prices of non-food goods (fuels included) increased below average by only 4.6% y/y in August, despite the sharp rise of fuel prices. After having decreased on a monthly basis in March to July, fuel prices bottomed out and advanced by 3.1% m/m in August, recovering only part of the ground lost during the previous months. On an annual basis, fuels were 9.8% up. The administered prices increased by 7.4% on average, not much above the overall consumer price inflation.

The average prices of services increased by 8.6% y/y in August, driven by the administered prices: water supply and sewage services (+22% y/y), hot water supply (+14%), central heating (+14%). This was the result of price adjustments made last autumn and in the first half of this year, while no price hikes were made in July-August.