Nr. 6 (156), June 2008

Expensive money affect inflation

Alexandru TANAS | Prices & Inflation

In May, banks started to advertise for interest rates on deposits of 21.5% in lei and 14% - US dollars and Euro. Such high interest rates aim for the banks to attract available resources from the market, from households and from economic agents.

Johan MATHISEN, IMF Resident Representative in Moldova:

Money supply has increased significantly in Moldova, while supply of goods and services is lagging noticeably. Therefore, the National Banks attempts through its actions to limit the money supply so that its pressure on prices dampens. We hope that this situation will not last and in the following months inflations will start going down. It seems to me that the real cost of money is lower than deposit rates publicised for advertising purposes. Moreover, banks have different offers for profitable money placement. Thus, the share of expensive deposits in the money attracted on the market is of only about 10%. The general cost of money for banks is the average price paid by them for all resources - equity, shareholders' money as retained profit, money attracted from abroad, and deposits.

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