Ukraine Monetary Policy


Ukraine: Central Bank leaves interest rate unchanged again

December 17, 2015

At its 17 December Monetary Policy meeting, the National Bank of Ukraine (NBU) decided to hold the discount rate unchanged at 22.00% for the second 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 as expected in November. While inflation remained broadly unchanged, core inflation continued to ease. The Bank added that inflationary pressures continue to decrease largely driven by weak domestic demand and restrained monetary policy. Moreover, the NBU expects inflation to proceed on a downward path going forward due to low global commodities prices and subdued domestic demand.

Despite the recent improvement in inflationary dynamics, the Bank outlined a number of risks to inflationary pressures that influenced the decision to hold rates. These risks include low demand for Ukrainian exports, the recent rise in the United States’ interest rate as well as the depreciation in a number of key trading partners’ currencies. In addition, tax increases and exchange rate fluctuations may also impact inflation in the near-term.

Against this backdrop, the Central Bank decided to hold the discount rate unchanged to anchor inflation expectations. However, the Bank added that “provided that the disinflationary trend remains, inflationary expectations improve and risks are mitigated, the National Bank may resume the gradual easing of monetary policy.” The next monetary policy meeting is scheduled for 28 January.

FocusEconomics Consensus Forecast panelists expect the NBU’s discount rate to end the year at an average forecast of 14.50%. For 2017, panelists expect the discount rate to fall to 12.06%.

Author: Angela Bouzanis, Senior Economist

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Ukraine Monetary Policy Chart

Ukraine Monetary Policy December 2015

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

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