Third Cut of National Bank of Ukraine Easing Cycle, and Many More to Come

September 5, 2019

Ukraine’s central bank policy rate has been cut by 50 basis points to 16.5%. This follows similar-sized easings earlier this year in April and July. Since officials consider 8% to be the rate level that represents a neutral monetary stance and since officials believe that CPI inflation, which is now at 9.1%, will continue fallingĀ  and reach the 5% target by the end of 2020 according to a released statement, a number of additional rate cuts presumably lie ahead.The policy rate crested at 18% from September 2018 until April of this year. One ongoing disinflationary factor has been an appreciating hryvnia. Low world energy prices are another. In discussing the timing of future reductions of the central bank policy benchmark, the statement says, “if structural reforms speed up, the NBU Board could cut the key policy rate more quickly” but alternatively mentions too that “if inflation risks materialize, in particular through persistent demand pressure, the easing of monetary policy will be more gradual.”

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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