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Ukraine Monetary Policy April 2023

Ukraine: NBU stands pat again in April

At its meeting on 27 April, the National Bank of Ukraine (NBU) maintained its key policy rate unchanged at 25.00%.

April’s hold came on the back of a sustained disinflationary trend in the first three months of 2023: Inflation moderated to 21.3% in March, down from February’s 24.9%. Nevertheless, price pressures remained prohibitively high, and risks to the outlook were skewed firmly to the upside in the context of Russia’s invasion. As such, the Bank deemed it necessary to maintain its key policy rate at the level established in June 2022 in the hope of supporting the exchange rate regime, putting downward pressure on inflation expectations and taming price pressures.

Looking ahead, the NBU issued a significant downward revision to its inflation forecasts. It now sees the headline rate at 14.5% in 2023, previously 18.7%. Concurrently, the Bank raised its GDP forecasts for this year to 2.0%, up from the previous 0.3%. As such, the Bank stated it now envisions the start of its monetary policy easing cycle to begin in Q4 2023, earlier than it previously projected. Although the Consensus is for easing to begin in Q2 2023, the majority of our panelists anticipate the NBU to begin lowering its key policy rate by Q4 2023.

That said, an escalation of the war could delay monetary policy easing. Additional fiscal pressures due to the war, international financial aid and monetary policy moves by other key central banks are further factors to watch.

The next meeting is scheduled for 15 June.

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