The National Bank of Ukraine (NBU) kept the monetary policy interest rate on hold at 18%, says inflation to fall to 6.3% in 2019

The National Bank of Ukraine (NBU) kept the monetary policy interest rate on hold at 18%, says inflation to fall to 6.3% in 2019
The National Bank of Ukraine (NBU) kept the monetary policy interest rate on hold at 18%, says inflation to fall to 6.3% in 2019
By bne IntelliNews January 31, 2019

The National Bank of Ukraine (NBU) kept the monetary policy interest rate on hold at 18% at its regular meeting on January 31, after the central bank had hiked the rate three times last year to battle persistent inflation.

Ukraine ended 2018 with inflation of 9.8% after it ticked up again at the end of the year, but the regulator set its target rate for inflation to 5%.

However, the regulator kept its October forecasts for the actual rate of inflation in 2019 to 6.3% from 9.8% in 2018.

"Inflation will continue to slow down gradually. As before, the NBU expects that it will fall to 6.3% by the end of 2019 and by 5.0% by the end of 2020. In addition, as it is planned earlier, by the beginning 2020, inflation will fall within the target range - 5% +/- 1 percentage point (p.p.)," the central bank reported on its website.

The last time the NBU cut rates was in May 2017 and the government was unhappy with the growth-killing hikes last year. But the NBU earned itself some kudos and demonstrated its independence from the government by hiking rates.

Some analysts polled by Reuters had expected a more benign inflation trend to prompt a cut. Inflation dropped into single digits at the end of last year.

The bank “has decided to keep its key policy rate at 18.0% per annum. The rate was maintained at the same level in order to drive inflation down to the target of 5% in 2020,” the NBU said in a statement as cited by Reuters.

The central bank also announced a slight downward revision to its economic growth forecast for 2018 to 3.3% from 3.4% but kept its 2019 forecast unchanged at 2.5%.

It said that uncertainty caused by Ukraine holding elections this year posed a risk to its forecasts. It also said further planned increases in gas prices would impact inflation.

Eight of 15 analysts polled by Reuters had predicted a rate cut, while the other seven believed the central bank would hold fire ahead of a presidential election on March 31.

In related news the finance ministry said it will issue $2bn of Eurobonds in 2018, Deputy Central Bank Chief Dmitry Sologub told a press briefing.

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