Ukraine: Central Bank leaves interest rate unchanged
March 3, 2016
At its 3 March Monetary Policy meeting, the National Bank of Ukraine (NBU) decided to hold the discount rate unchanged at 22.00% for the fourth 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 the decision is designed to stave off adverse impacts from political uncertainty and global economic volatility. In addition, the Bank added that price dynamics continued to evolve on a downward path and broadly in line with the Bank’s expectations. Moreover, the heightened volatility in the hryvnia observed in the beginning of 2016 has had a limited impact on price pressures. Looking forward, the Bank added that subdued domestic demand and low commodity prices will likely allow price pressures to diminish over the course of this year. However, a sharp decline in inflation will be restrained by increases in administrated prices.
In conclusion, the Bank pointed out that the major downside risks to the inflation forecast are the evolution of the hryvnia and the balance of payments, as well as inflation expectations. Considering these risks, the Bank deemed it necessary to maintain the current discount rate. The Bank added that if inflationary risks subside, this may resume the gradual easing in the discount rate. The next monetary policy meeting is scheduled for 21 April.