The National Bank of Ukraine (NBU) cut its policy rate by 0.5pp to 15.0%, the regulator said on September 15 after a meeting of its executive board.

It was the fifth consecutive policy rate cut since April 22, amounting to a 7.0pp total reduction from 22%.

The NBU referred to further reduced inflation risks (August CPI was +8.4% y/y) and the September 14 decision of the International Monetary Fund (IMF) to extend the country a new $1bn loan tranche as key factors enabling it to go forward with monetary easing.

According to regulator, the recent volatility on the foreign currency market will not affect Ukraine’s 2016 inflation rate, which is still expected to be within the target range of 12%, +/- 3pp.

The NBU promised to further cut its policy rate in case risks to price stability continue easing.

“With relatively low inflation so far, and good news from the IMF a day before, some decrease in the policy rate was widely expected,” Alexander Paraschiy, an analyst at the Concorde Capital brokerage in Kyiv, wrote in a research note, adding that the revision of the key rate will have an immediate effect on money markets.

With expected seasonal pressure on the Ukrainian currency, as well as anticipated accelerated inflation due to utility rate hikes in September and October, the NBU will be less likely to further cut the policy rate in October. "In the best case, we expect it might decrease the rate further by 0.5pp next month," Paraschiy added.