Ukraine Monetary Policy January 2016


Ukraine: Central Bank leaves interest rate unchanged

January 28, 2016

At its 28 January Monetary Policy meeting, the National Bank of Ukraine (NBU) decided to hold the discount rate unchanged at 22.00% for the third meeting in a row. Previously, the NBU had eased its monetary policy stance in an effort to support Ukraine’s economic recovery.

In its accompanying statement, the Central Bank commented that price dynamics continued to evolve on a downward path and broadly in line with the Bank’s expectations. Tight monetary policy, subdued domestic demand and steady inflation expectations have allowed price pressures to diminish toward the end of last year. The Bank added that these factors should support a further decline in inflation this year. However, a sharp decline in inflation will be restrained by increases in administrated prices.

Regarding the economy, the NBU revised down its outlook for 2016. The Bank cited a slow recovery due to the low global commodity price environment, moderating global growth prospects and fresh trade sanctions imposed by Russia as key reasons for the revision. Consequently, the Bank now sees the Ukraine economy growing 1.1% in 2016.

Looking forward, the Bank pointed out that the major downside risks to the inflation forecast are the evolution of the hryvnia and the balance of payments. Considering these risks, the Bank deemed it necessary to maintain the current discount rate. The Bank added that if inflationary risks subside, it may resume the gradual easing in the discount rate. The next monetary policy meeting is scheduled for 3 March.

FocusEconomics Consensus Forecast panelists expect the NBU’s discount rate to end the year at an average forecast of 14.63%. For 2017, panelists expect the discount rate to fall to 11.85%.

Author: Angela Bouzanis, Lead Economist

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