National Bank of Ukraine

March 2, 2017

Ukraine’s key policy interest rate will remain at 14.0%. Monetary officials released a statement after making that decision that concedes that risks of greater inflation have become greater since their previous policy review on January 26, which also did not change the rate. Inflation accelerated to 12.6% in January and likely will climb further in February. The hryvnia has weakened. The major risks stem from “intensification in hostilities and a transport blockade in the east of Ukraine. If lasted for a prolonged period, these developments will lead to the ultimate disruption of production and supply chains and, thus, to a reduction in steel and coke output, as well as mining and electricity production. Implicitly, this poses risks to the inflation forecast through a negative impact on the balance of payment.” Thus the central bank officials defend maintaining a continuing prudent stance, lest expected inflation creep higher and actual inflation exceed target in 2017 and 2018.

From a 30% high at the start of August 2015, the key interest rate had been subsequently lowered in increments of 300, 500, 400, 150, 100, 50 and, ultimately last October, 100 basis points to the current level of 14.0%.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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