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Ukraine Monetary Policy January 2024

Ukraine: National Bank of Ukraine keeps rates unchanged in January

At its 25 January meeting, the National Bank of Ukraine (NBU) held rates stable at 15.00%, as markets had anticipated. The decision followed four consecutive cuts and marked the first hold since the NBU initiated its monetary policy easing cycle in July 2023.

The NBU stood pat to support the hryvnia, keep a lid on price pressures in 2024 and ensure inflation’s return within the 4.0–6.0% target in 2025. The Bank noted that inflation is set to accelerate in the second half of this year due to a low base effect stemming from 2023’s bumper harvest, recovering domestic demand, prolonged security risks and rising wages. Moreover, the risk to stable foreign aid inflows—with more than USD 60 billion in U.S. assistance blocked by political deadlock—further motivated the hold.

In its forward guidance, the Bank stated that upcoming decisions would be based “on inflation dynamics, the state of the FX market, the regularity of international aid inflows, the evolution of security risks, and other factors”. The majority of our panelists now expect further rate cuts through end-2024, while a decreasing number of panelists see the policy rate remaining stable this year.

The next monetary policy meeting is scheduled for 14 March.

Andrew Matheny and Johan Allen, analysts at Goldman Sachs, expect more rate cuts in 2024:

“We maintain our more benign inflation forecast compared with the NBU and continue to expect that, subject to sufficient international financial support being provided by Ukraine’s allies and the successful lifting of further FX restrictions, this would enable the NBU to resume its cutting cycle as early as Q2.”

In contrast, EIU analysts see rates remaining unchanged this year:

“We do not expect a full return to pre-war monetary policies until 2027 under our current baseline scenario. […] The NBU is likely to keep monetary policy on hold during 2024, assuming that disinflation stalls in the first half of the year. The policy rate is likely to fall gradually from 2025.”

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