The National Bank of Ukraine (NBU) has retained refinancing rate at 14%. The bank has announced its decision to conduct the more moderate monetary policy to curb inflation consequences of the increase of the minimum wage to 3,200 UAH a month.
The central bank said that the decision on the size of the discount rate was approved by the NBU Board on December 8.
“There are high chances that by the end of the year consumer inflation would meet the NBU target – around 12%. The inflation targets for 2017 and 2018 (8% plus/minus 2% and 6% plus/minus 2%) remain realistic”, the NBU said.
The regulator said that if risks for price stability decreased, the central bank would continue mitigating the monetary policy. This helps to reduce the cost of credit resources and to support the economy.
The NBU said that since making the previous monetary policy decision at the end of October when the rate was cut from 15%, risks for further inflation have grown. This makes the NBU relax the monetary policy in a slower key.
“First the NBU took into account the necessity of neutralizing effects from the sharp increase of the minimum wage in 2017. According to the NBU, it would moderately influence future consumer inflation. Taking into account the fact that the increase of income of some Ukrainians would stimulate their consumption, this could add around 1% to inflation figure next year”, the regulator said.
The NBU also took into account other risks.
“First the vagueness due to intensification of political tension has grown. Second, the likelihood of a delay in the provision of the official financing under the IMF-funded program has grown”, the central bank said. (Interfax/Business World Magazine)