Ukraine Monetary Policy


Central Bank leaves interest rate unchanged

At its 29 October Monetary Policy meeting, the National Bank of Ukraine (NBU) decided to hold the discount rate unchanged at 22.00%. The move follows two consecutive rate cuts as the NBU eased its monetary policy stance to support Ukraine’s economic recovery.

In its accompanying statement, the Central Bank commented that economic activity recovered slightly in September, with improved performances in the agricultural and industrial sectors. In addition, the ceasefire has contributed to a recovery in the mining sector. Moreover, stabilization of the financial system is beginning to take hold, highlighted in September by the first reported growth in foreign currency deposits in two years.

Despite these positive signs, the Bank emphasized that short-term inflation risks remain. The depreciation of the hryvnia earlier this year continues to contribute to inflationary pressures and a lower-than-expected harvest is likely to impact foodstuff prices in October.

Against this backdrop, the Central Bank decided to hold the discount rate unchanged to anchor inflation expectations. However, the Bank added that “as an expected disinflationary trend takes hold, the National Bank of Ukraine will continue to ease monetary policy.” The next monetary policy meeting is scheduled for 17 December.

FocusEconomics Consensus Forecast panelists expect an average forecast of 20.60% for the NBU’s discount rate this year. For 2016, panelists expect the discount rate to fall to 15.55%.

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