Headline inflation in Moldova (chart) slowed to 6.8% y/y in December from 7.0% y/y in November, while core inflation declined more sharply to 4.7% y/y from 5.1%, according to data published by the National Bureau of Statistics (BNS).

Despite the moderation, headline inflation remained above the central bank’s target band of 3.5-6.5%, missing the National Bank of Moldova’s expectation that inflation would return within the range by the end of the year. Core inflation, however, fell below the midpoint of the target band, signalling a stronger underlying disinflation trend.

The decline in core inflation followed the National Bank of Moldova’s decision in December to cut its monetary policy rate by one percentage point to 5%.

The central bank has maintained a 5% inflation target for several years, although public discussions have recently been opened on potentially lowering the target band in the medium term.

Price dynamics across major components remained mixed. Services inflation, which under the national methodology includes energy prices, accelerated to 14.9% y/y in December from 14.2% y/y in November. The increase was driven largely by a 24% month-on-month rise in average, end-user electricity prices.

Moldova has faced elevated electricity costs since the beginning of 2025, after Russia halted free gas supplies to the separatist region of Transnistria. The region had previously generated electricity for the entire country at relatively low cost. The government has been reassessing its subsidy schemes in line with available budgetary resources, a process that is expected to exert further upward pressure on end-user energy prices.

Food price inflation slowed to 5.6% y/y in December from 6.3% y/y in November, contributing to the easing of headline inflation. Non-food goods prices remained the most stable component over the past year, increasing by 2.3% y/y in December, compared with 2.7% y/y a month earlier.

According to the inflation forecast published by the National Bank of Moldova in November, inflation was expected to return to within the target range in December and would remain in the lower part of the band from the first quarter of 2026 until the end of the projection horizon.

While the December target was missed, base effects following sharp electricity price hikes in the first months of last year are expected to support a more pronounced decline in headline inflation in January and February.