Ukraine's central bank cuts key interest rate to 16.5%

By bne IntelliNews June 23, 2016

The National Bank of Ukraine (NBU) will cut the refinancing rate from 18% to 16.5% from June 24, the regulator said on June 23.

The move was attributed to steady inflationary pressure reduction, improved inflation expectations and stable foreign exchange market situation. Specifically, headline inflation dropped to 7.5% y/y in May, which was consistent with the NBU's projections.

"Inflationary pressure reduction was of a fundamental nature, which is confirmed by core inflation slowdown, an regulator said in a statement. "That was favoured by prudent monetary policy and strengthening of hryvnia exchange rate due to favorable world commodity markets situation. In addition, increase of foods supply [during summer months] supported the disinflationary trend."

The NBU intends to archive 12% +/-3% inflation this year, 8% +/-2% in 2017.

According to NBU estimates, economic growth was accelerated in the second quarter of 2016 due to external and investment demand. "That was favoured by improved global commodities markets situation and better enterprise expectations against the background of internal political stabilisation and agreement with the International Monetary Fund at expert level regarding second review of Extended Fund Facility Arrangement (EFF)," the statement added.

Ukraine's real GDP increased by 0.1% y/y in the first quarter of 2016 (declined by 0.7% q/q). At the same time, experts believe growth prospects remain challenging in light of weak exports, ongoing security risks, the weak domestic business environment, and the need for fiscal prudence. The Ukrainian government forecasts economic growth at 2% in 2016. Meanwhile, the IMF puts Ukraine's economic growth at 1.5% in 2016, and at 2.5% in 2017.

Ukraine is still negotiating the renewal of its overall $17.5bn credit agreed with the IMF in March 2015 to aid its economic recovery. In May, the Fund said the government must still secure the passage of 19 bills through parliament to assure the resumption of money under the programme.

Related Articles

Bulgaria’s FIBank denies links to Yulen, risk of collapse

Bulgaria’s FIBank on June 15 denied claims by opposition Democratic Bulgaria and investigative news outlet Bivol.bg about links between one of its shareholders – Tseko Minev – and the ... more

EBRD invests in Port of Tallinn to support IPO

The European Bank for Reconstruction and Development (EBRD) has acquired a 3.6% stake in the Estonian infrastructure company AS Tallinna Sadam, the manager of the port of Tallinn, supporting the ... more

ECB holds a meeting in Riga without Latvian central bank governor

The European Central Bank governing council met in the Latvian capital Riga on June 14 with the host, the beleaguered governor of Latvijas Banka Ilmars Rimsevics, not attending. Rimsevics ... more

Dismiss