Ukraine Monetary Policy June 2016


Ukraine: Central Bank makes second consecutive cut to key interest rate

June 23, 2016

Amid stabilizing inflationary pressures in Ukraine’s battered economy, the National Bank of Ukraine (NBU) decided to cut the key policy rate from 18.00% to 16.50% at its 23 June monetary policy meeting. At its April monetary policy meeting, the NBU announced that it had converged the discount rate and the key policy rate to improve transmission of monetary policy.

In its accompanying statement, the Central Bank outlined that the decisions came against a backdrop of easing price pressures thanks to prudent monetary policy and an appreciation in the exchange rate as well as weak domestic demand. While inflationary pressures have abated notably in recent months, the Bank pointed out that increased tariffs for public utilities will contribute to price pressures this year, but are expected to gradually fade in 2017 and not require any monetary policy responses. The Bank emphasized that cooperation with the IMF and government commitment to pursue reforms are key to ensure price stability. The NBU pointed out that it will continue with monetary policy easing to support the recovery as long as further rate cuts do not interfere with the Bank’s inflation target. The next monetary policy meeting is scheduled for 28 July.

FocusEconomics Consensus Forecast panelists expect the NBU’s key policy rate to end the year at an average forecast of 16.04%. For 2017, panelists expect the key policy rate to fall to 11.86%.

Author: Angela Bouzanis, Senior Economist

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Ukraine Monetary Policy Chart

Ukraine Monetary Policy June 2016 2

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

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