The National Bank of Moldova’s decision to cut the policy rate to 6.00% marks the first reduction since May 2025, when the rate stood at 6.50%. This 25 basis point cut contrasts with market expectations of a steady 6.25% rate, signaling a shift toward a more accommodative monetary stance. The move reflects a balancing act between moderating inflation pressures and slowing economic growth amid external uncertainties.

Drivers this month

• Inflation eased to 7.10% YoY in August from 7.50% in July, below the 12-month average of 7.30%.
• Industrial output contracted 0.80% MoM in July, signaling cooling demand.
• Geopolitical tensions in Eastern Europe have increased risk premiums, pressuring the MDL currency.

Policy pulse

The 6.00% rate sits below the 6.25% level maintained since June, indicating a cautious pivot as inflation trends downward but remains above the 5% target. The central bank’s forward guidance suggests readiness to adjust further if growth weakens or inflation falls faster than expected.

Market lens

Immediate reaction: The MDL currency weakened 0.30% against the USD in the first hour post-announcement, while 2-year government bond yields dropped 12 basis points, reflecting market relief over reduced tightening risks.

Core macroeconomic indicators provide context for the rate cut. Inflation’s recent moderation from 7.50% to 7.10% YoY contrasts with the 7.30% average over the past year, suggesting easing price pressures. Meanwhile, GDP growth estimates for Q2 2025 slowed to 1.20% YoY from 2.00% in Q1, highlighting a deceleration in economic momentum.

Inflation and growth trends

• Consumer Price Index (CPI) rose 0.40% MoM in August, down from 0.70% in July.
• Unemployment rate held steady at 5.80% in August, near the 5.70% average for 2024–25.
• Retail sales growth slowed to 1.00% YoY in July, down from 2.30% in May.

Fiscal policy & government budget

The government’s fiscal stance remains moderately expansionary, with a budget deficit forecast of 3.80% of GDP for 2025, slightly above the 3.50% target. Increased social spending and infrastructure investments aim to support growth but add pressure on public debt, which stands at 42% of GDP.

External shocks & geopolitical risks

Heightened geopolitical tensions in the region have increased volatility in capital flows and commodity prices. Energy import costs rose 5% in August, adding inflationary pressure. The central bank’s rate cut may also be a preemptive measure to cushion the economy against these external headwinds.

Drivers this month

• Inflation deceleration contributed -0.15 percentage points to the rate cut decision.
• Industrial output decline added -0.10 percentage points.
• Geopolitical risk premium increased by 0.05 percentage points, partially offsetting easing.

Policy pulse

The central bank’s rate now sits 100 basis points above the pre-pandemic average of 5.00%, reflecting a cautious approach to inflation control despite recent easing. The move signals a shift from active tightening to data-dependent flexibility.

Market lens

Immediate reaction: The MDL/USD exchange rate depreciated 0.30%, while 2-year government bond yields fell from 7.10% to 6.98%, indicating market pricing of a less aggressive tightening path.

Looking ahead, the central bank’s policy trajectory will hinge on inflation dynamics, growth momentum, and geopolitical developments. Three scenarios emerge:

Bullish scenario (30% probability)

• Inflation falls below 5.50% by Q1 2026, enabling further rate cuts to 5.50%.
• GDP growth stabilizes above 2.00% YoY, supported by fiscal stimulus and improved external conditions.
• Currency stabilizes, reducing imported inflation risks.

Base scenario (50% probability)

• Inflation remains around 6.50% through early 2026, prompting a hold on rates at 6.00%.
• Growth remains modest at 1.00–1.50% YoY, constrained by external uncertainties.
• Fiscal deficit remains near 3.80% of GDP, with moderate debt accumulation.

Bearish scenario (20% probability)

• Geopolitical shocks worsen, pushing inflation above 8.00% and forcing rate hikes back to 6.50% or higher.
• GDP contracts by 0.50% YoY due to external shocks and tighter financial conditions.
• Currency depreciation accelerates, increasing imported inflation and fiscal pressures.

Monetary policy outlook

The central bank’s forward guidance emphasizes flexibility, with a bias toward maintaining the current rate if inflation stabilizes. Market expectations, as reflected in breakeven inflation swaps, price a 40% chance of further easing by mid-2026.

The September 2025 interest rate cut in Moldova signals a cautious pivot amid easing inflation and slowing growth. While the move provides relief to borrowers and financial markets, risks from geopolitical tensions and fiscal pressures remain. The central bank’s data-dependent approach will be critical in navigating these uncertainties. Investors and policymakers should monitor inflation trends, currency stability, and fiscal discipline closely to gauge the next phase of monetary policy.

Key Markets Likely to React to Interest Rate Decision

The interest rate decision will influence several key markets that track Moldovan macroeconomic conditions closely. The MDL currency pair is directly impacted by rate changes through capital flows and inflation expectations. The USDMDL forex pair will reflect shifts in monetary policy and risk sentiment. On the equity side, MOLD stocks, representing Moldovan financial and industrial sectors, tend to react to interest rate shifts. Additionally, the regional currency pair EURMDL will be sensitive to ECB policy and Moldovan rates. Lastly, the crypto pair BTCEUR often moves inversely to risk-off sentiment triggered by geopolitical shocks affecting Moldova.

Indicator vs. USDMDL Since 2020

FAQs

What is the significance of Moldova’s interest rate cut in September 2025?

The cut to 6.00% signals a cautious easing amid moderating inflation and slowing growth, balancing risks from external shocks and fiscal pressures.

How does the interest rate decision affect Moldova’s currency?

Lower rates tend to weaken the MDL against major currencies, as seen in the immediate 0.30% depreciation of USDMDL after the announcement.

What are the risks facing Moldova’s monetary policy going forward?

Geopolitical tensions, rising energy costs, and fiscal deficits pose upside inflation risks that could force a reversal to tighter policy.

Key takeaway: Moldova’s rate cut reflects a delicate balancing act amid easing inflation and persistent external risks, setting the stage for a data-driven policy path in 2026.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.