Ukraine keeps benchmark interest rate at 22%

By bne IntelliNews October 30, 2015

The National Bank of Ukraine (NBU) will leave the refinancing rate unchanged at the level of 22%, taking the existing short-term inflation risks into account, the regulator said in a statement published on October 29.

"The NBU decision to retain the refinancing rate is aimed at preserving the trend towards the reduction of inflation expectations," the statement reads. 

The NBU maintained its inflation forecast at 12% to the end of 2016, given that the fundamental factors contributing to the disinflation trend in the economy remain relevant. These factors include weak domestic demand, low prices in the world commodity markets, the balance of the current account and a balanced fiscal policy, Interfax news agency reported.

Meanwhile, NBU governor Valeriya Gontareva told journalists that the 22% rate is "optimal as of now ... The main reason for this decision is the increase of short-term inflation risks", Gontareva underlined.

According to Bloomberg, consumer prices in Ukraine rose more quickly in September than anticipated because of the delayed effects of the hryvnia devaluation and rising administrative tariffs, Gontareva said. Inflation may accelerate in October on a smaller-than-expected harvest and increasing heating prices.

Inflation in Ukraine in September stood at 2.3% m/m after 0.8% m/m deflation in August, the State Statistics Service Ukrstat reported. According to official data, inflation in Ukraine in September reached 51.95% y/y after 52.8% y/y in August.

The World Bank forecasts that inflation in Ukraine will reach 50.8% y/y in 2015 before slowing to 12.2% y/y in 2016, while the NBU estimates inflation in 2015 at 44% y/y.

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