The consumer price index in Moldova (chart) returned in October to the same level it was six months earlier, in April, driven by subdued demand (food prices dropped by 0.6% over the six-month period), the stronger domestic currency and 16% lower regulated prices of utilities.

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.

The headline inflation rate plunged abruptly to 6.3% y/y in October, from 8.6% y/y in September and 9.7% y/y in August partly on low-base effects.

It thus entered the inflation targeting band (5% +/-1.5pp) for the first time since August 2021, after peaking at 34% y/y for three consecutive months last summer.

The core inflation eased to 5.1% y/y in October, after it exceeded 30% y/y during last late summer.

Against September, the consumer prices in Moldova increased by nearly 0.5% m/m (consistent with an annualised rate of 7.2% y/y) mainly on higher seasonal prices of vegetables, while the price of fuels edged down by 1.6% m/m.