21 june, 2019

Professional market participants say that the National Bank of Moldova’s decision to change the main rates of monetary policy instruments was unexpected and ambiguous.

Asked by Infotag about how the market will react to this decision of the regulator, the interlocutors firmly stated that the NBM gave a clear signal that money grows in price, which is demonstrated by the base rate that grew to 7% from 6.5%.

“No matter the regulator wants or not, now banks will be raising the rates on credits, in parallel taking care of liquidity, which will force some banks to borrow resources from population and economic agents at more attractive conditions against those that are on the market today”, experts say.

According to them, the very fact of new attraction of resources by banks plays into the hands of NBM, as they help reducing the volume of extra money in the banking sector, which unfortunately, are very difficult to be placed. Their volume currently exceeds 5 million lei.

“However, banks will have the possibility to attract resources only with condition that interest rates will be profitable for depositors. For this, they will have to come to the market with new products, orienting on the fact that the size of base rate is 7%, while the rate of annual inflation (May 2019 against May 2018) is 4.6% and is growing”, say the market participants.

Some of interlocutors maintain that according to the regulator’s promises to follow the banks’ behavior and their businesses, it may be foreseen the NBM’s reluctance to raise interest rates on credits, as they were sustainably falling during a long period of time.

“It seems that the regulator mostly hopes for the fact that banks will not change the conditions of crediting and will consciously give up on their revenues, which will now create additional pressure on inflation the NBM is fighting against”, experts say, adding such behavior of banks is unlikely.

The last forecasts of inflation say that its rate will stay in the inflation corridor comfortable for the NBM (5% ± 1.5%) not for long time.

“Market participants understand that most likely in autumn the inflation will go beyond this corridor and will exceed 7%, which is currently quite an optimistic forecast. Thus, it is clear that banks, building their policy of interest rates both in money placement and their attraction, will be orienting on the growing inflation trend”, experts suppose, pointing at the high influence of external factor on the Moldovan inflation, connected first of all with imports.

According to them, even if now banks will demonstrate loyalty and will not respond to the base rate raising to 7%, this will be just a short-term position.

“The very situation on the market will push banks to the situation when the growing cost of money will affect the interest rates even despite regulator’s great discontent about this”, say Infotag interviewees, not excluding the application of other measures the NBM may resort to at any moment.

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