Ukraine Monetary Policy


Ukraine: Central Bank keeps interest rate unchanged at 15-year high

May 29, 2015

At its 27-28 May Monetary Policy meeting, the National Bank of Ukraine (NBU) decided to leave the discount rate unchanged at 30.0%. As a result, the discount rate remains at the highest level since 2000.

In its accompanying statement, the Central Bank pointed out that there has been a positive trend in the money market and that the official exchange rate of the hryvnia fluctuated within a higher band in May than in April. Moreover, the Bank added that public confidence in the banking sector is improving and that household deposits rose in May?(April).

Regarding prices, the Bank stated that inflation accelerated rapidly in April, driven mainly by a rise in utility and natural gas tariffs. Although, the Bank added, that part of this high inflation reading can be attributed to the data collection procedure used by State Statistics Service of Ukraine. Looking forward, the Bank expects inflation to slow gradually over the next year.

Concerning Ukraine’s economy, members of the monetary policy meeting expressed concerns that the country is falling into a protracted recession, which is underscored by the fact that the index of key sectors output contracted 23.4% in April. Considering the macroeconomic situation in Ukraine, the Committee members’ opinion is, “that the major contribution that monetary policy can make to the economic recovery is to put the money market, notably its foreign exchange segment, back on track.”

Against this backdrop, the Central Bank decided to keep the discount rate at the historically high level of 30.0% to place inflation on a downward path and support the return of household deposits into Ukraine’s banks. Looking forward, the Central Bank stated that as foreign exchange rate pressures subside, the NBU may loosen monetary policy in the future.

FocusEconomics Consensus Forecast panelists expect an average forecast of 21.05% for the NBU’s discount rate this year. For 2016, panelists expect the discount rate to fall to 14.67%.

Author: Angela Bouzanis, Senior Economist

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Ukraine Monetary Policy Chart

Ukraine Monetary Policy May 2015

Note: NBU discount rate in %.
Source: National Bank of Ukraine (NBU).

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