Ukraine's central bank cuts key policy rate to 13%

By bne IntelliNews April 13, 2017

The National Bank of Ukraine (NBU) will cut its key policy rate by 1 percentage point (pp) to 13% per annum, the regulator said in a statement published on April 13.

According to the central bank, the resumed cycle of monetary policy easing comes under the pursuit of inflation targets set by the NBU for 2017-2019 and will help propel Ukraine’s economic growth. In early March, the regulator left its key policy rate unchanged at 14% per annum in order to mitigate risks for inflation targets in 2017-2018.

Last month, headline inflation in Ukraine was recorded at 15.1% year-on-year. “Price growth has accelerated primarily due to base effects and higher production costs,” the NBU said. “Actual acceleration of headline inflation was as expected, although at a lower trajectory than projected [by the NBU in January at 16.4%].”

The central bank added that the situation on the country’s FX market has helped weaken pressure on prices. “The external price environment for Ukrainian exporters has become more favourable since early 2017 due to recovery in prices for steel, iron ore, and grains, with an export potential being further bolstered by record high grain and oil crop yields,” the NBU said.

Appreciation of the hryvnia since mid-January was underpinned by solid export revenues, the central bank added.

The NBU forecasts 8% ± 2 pp for 2017, 6% ± 2 pp in 2018 and 5% ± 1 pp in 2019. The inflation forecast for 2017 remains at 9.1%, and 6% for 2018. Headline inflation is projected to decrease to 5% in 2019.

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