Ukraine central bank minutes reveal further monetary tightening likely

The National Bank of Ukraine (NBU) began on Feb. 5
publishing the summary of its monetary policy committee meeting on its website.
The publication revealed the details of the Jan. 25 meeting at which they
agreed to raise the key policy rate by 150 bps. The summary indicates the names
of officials present and key discussion points, but does not specify who expressed
a particular point of view.

All seven members of the committee shared the view
that the key police rate needs to be raised, but they were not unanimous on the
rate of revision. Six members spoke out for raising the rate by 150 bp, while
one member believed that 100 bp was enough.

The document indicates that they were prompted to
review the rate by the postponement of the new IMF loan tranche, higher social
payments and government wages, rising global oil prices for oil and climbing
import prices.

Evgeniya Akhtyrko: The summary
indicates that the decision to raise the key rate, which was not expected by
any consensus and which was fiercely criticized by the Cabinet last week, was
approved by an overwhelming majority of the NBU committee members. The document
also reveals that the majority of NBU decision makers do not see it likely that
the rates will decrease by the end of 2018. Instead, they believe that further
monetary policy tightening is highly likely, unless there are clear signs of
lowering inflationary pressure.

Publishing minutes is a common practice for central
banks in developed counties. By launching this practice, the NBU is
demonstrating its growing accountability and transparency.