Ukraine central bank leaves key policy rate unchanged, revises upwards inflation forecast

By bne IntelliNews January 26, 2017

The National Bank of Ukraine (NBU) has left its key policy rate unchanged at 14% per annum to mitigate inflation risks hampering the achievement of inflation targets in 2017-2018, the regulator said in a statement on January 26.

In late October, the NBU cut the rate from 15% to 14%, attributing the move to the further alleviation of risks affecting price stability in Ukraine. This provides some room to ease monetary policy, which was consistent with the need to achieve the regulator’s inflation targets in 2017-2018.

The NBU wanted to secure an inflation target of 12% +/-3% for 2016. Headline inflation considerably slowed down to 12.4% in 2016 from 43.3% in 2015, the central bank underlined.

While the NBU is pursuing an inflation target of 8% +/-2% for 2017, it was forced to revise its inflation forecast upward from 8% to 9.1%. The move was attributed primarily to the minimal wage rise increase to UAH3,200 (€110), which took effect from the beginning of the year.

"The decision of the government to increase minimal wages will have an effect on inflation directly through bolstered consumer demand (mainly for foods) and higher production costs, and indirectly through inflation expectations of the Ukrainians," the regulator said.

Higher consumer demand and productions costs are now projected to put additional pressure on the main inflation components in 2017, pushing core inflation up to 6.3%, and raw food inflation up to 7.0%.

The NBU expects that year-on-year inflation will remain high in the first three quarters of 2017 due to statistical base effect. It will return to one-digit figures only in the fifth quarter of this year.

"At the same time, the NBU does not consider reasonable to implement monetary policy instruments to reach inflation projections of 8% at the end of 2017 (central point of target range)," the statement said.

Related Articles

Iran "hits impasse" in bid to set up Bank of England clearing accounts

Iran is failing to make headway with a request to the Bank of England (BoE) to set up special clearing accounts for its banks, Reuters reported on March 20. Sources said the BoE ... more

IMF delays new $1bn tranche to Ukraine due to Donbas blockade

Ukraine's main donor, the International Monetary Fund (IMF), has cancelled a board meeting scheduled for March 20 that was expected to see the release of a $1bn tranche to Ukraine, while demanding ... more

IIB’s new placement to support debt-ridden Development Bank of Mongolia

The International Investment Bank (IIB) is participating in a new placement of Mongolian international sovereign bonds denominated in US dollars alongside other international ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss