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.
The European Central Bank (ECB) President Mario Draghi said on March 8 that the Eurozone’s central bank will seek clarity on what role the Latvian central bank governor Ilmars Rimsevics has ... more
The Azerbaijani government has finished taking over $2.2bn worth of external debt owned by the country's largest bank, International Bank of Azerbaijan (IBA), APA news agency reported on March 5 ... more
As Iran gets closer to Persian New Year’s Day (March 21), the great numbers of people wanting to travel abroad for the holidays are becoming increasingly anxious about the apparent evaporation of ... more