Three Elements for Solving the Inflation Problem
Automatically translated summary. The full text is available in Romanian.
Independent Think Tank “Expert-Grup” argues that inflation, which reached 29.1% annually in May in Moldova, requires a more balanced monetary policy, a depoliticised debate and better-targeted social compensation. The opinion piece analyses the causes of the 2022 price surge and the National Bank of Moldova's response.
Econometric estimates show that, unlike in the past, when aggregate demand and the exchange rate dominated, imported inflation is now the main driver, although the exchange rate, money supply and inflation expectations still matter. The National Bank of Moldova raised its base rate from 2.65% to 18.5% and increased reserve requirements to 36% for MDL deposits and 39% for foreign-currency deposits. The authors find that policy reacted to current inflation rather than anticipating it; the base rate could have been 16% with an earlier, gentler response.
The three recommendations are: focus monetary policy on future inflation risks and anchor expectations, adjusting the base rate earlier without harsh reserve hikes; avoid political pressure on the central bank, replacing parliamentary commissions with regular communication and strengthening its independence; and target compensation for higher tariffs at low-income families, for example through consumption caps.
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