Ukraine to keep rate at 7.5% as inflation slows down (Reuters poll)

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KYIV (Reuters) – Ukraine’s central bank is expected to keep its policy rate unchanged at 7.5% this week due to slowing inflation in the coming months, a Reuters poll found on Tuesday.

FILE PHOTO: The headquarters of the Ukrainian central bank is seen in central Kiev, Ukraine, March 3, 2016. REUTERS / Valentyn Ogirenko

Ten of the 14 Ukrainian analysts do not expect any rate changes at the July 22 monetary policy meeting, while the rest expect an increase to 8.0%.

The National Bank of Ukraine (NBU) left its main interest rate unchanged at the last monetary policy meeting in June, although inflation climbed to 9.5% in May from 6.1% in January .

The year-on-year reading remained stable in June, while monthly inflation slowed to 0.2% from 1.3% in May.

“The National Bank of Ukraine is trying to maintain a loose monetary policy,” said Dmytro Boyarchuk of the CASE-Ukraine think tank. “And if the NBU did not raise the rate when inflation accelerated to 9.5% yoy in May, it is unlikely to increase when the consumer price index started. to slow down in June. “

Analysts at the Ukrainian branch of Raiffeisen Bank said seasonal factors and a stronger hryvnia currency that made imports cheaper helped consumer prices stabilize in June.

“So the current trend of inflation … gives no reason to raise the key rate at the next MPC meeting,” they said in a note, adding that inflation at the end of the second quarter was close to the central bank forecast of 9.2%.

The central bank has raised rates twice this year in an attempt to bring inflation back to its target range of around 5% in 2022 and cut some anti-crisis measures at its June meeting.

Raiffeisen analysts said that the performance of the hryvnia and the gradual liquidation of expansionary anti-crisis monetary instruments have created the conditions for inflation to stabilize and reverse its uptrend in the future.

Adamant Capital’s Kostyantyn Fastovets, however, expects the central bank to raise the rate to 8.0% as it forecasts inflation to accelerate in July.

Reporting by Natalia Zinets; edited by Matthias Williams and Tomasz Janowski


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