NBU extends its tight monetary policy

The Ukrainian government’s monetary base declined 1.4% mom while its M2 money supply increased slightly by 0.8% mom in January, according to NBU data released on Feb. 14. Monetary authorities have been active in the sovereign debt market, increasing the state’s bonds portfolio by UAH 7.1 bln over the month.

Alexander Paraschiy: The January data shows that the NBU is not ready to relax its monetary clutches. The December 2012 liquidity expansion did not extend itself into the next month. Though active state bonds purchases continued to boost hryvnia liquidity in January, monetary authorities sterilized these injections through deposit certificate sales to banks (UAH 15.1 bln), which ultimately reduced the monetary base. So far, we are keeping our forecast for monetary base growth at 6.1% in 2013. However, monetary policy easing is still a question mark in view of the NBU’s stubborn reluctance to allow hryvnia devaluation.