The National Bank of Ukraine Retains its Key Policy Rate Unchanged 14% per annum
The NBU Board has decided to maintain its key policy rate at 14% per annum. It is intended to mitigate the inflation risks hampering the achievement of inflation targets in 2017-2018.
Further, the decline in inflation was facilitated by a moderate exchange rate volatility observed through most of the year owing to NBU measures aimed at smoothing excessive exchange rate fluctuations. However, despite favorable external and internal fundamental factors, in late December – early 2017, the depreciation pressure on the hryvnia gained in strength due to a number of situational factors. First, the foreign exchange market was impacted by a seasonal decline in business activity, in particular lower FX earnings from agricultural exports. Second, foreign currency supply was restricted due to high hryvnia liquidity held by exporters that received UAH 16 billion in VAT refunds in December 2016. Third, the FX demand rose following high budget expenditures in December.
The NBU is committed to achieve inflation targets of 2017-2018
The NBU expects inflation within the announced target band (8% ± 2 pp for 2017 and 6% ± 2 pp for 2018). The disinflation trend will be ensured through prudent monetary and fiscal policy and much lower rates of administered tariff growth.
GDP growth is expected to speed up, to 2.8% in 2017 and 3.0% in 2018, versus growth of 1.8% in 2016.
The decision to keep the key policy rate at 14% is approved by NBU Board Decision No. 49–D On the Key Policy Rate, dated 26 January 2017.