Inflation risks increase, NBU states
2 November 2021
The National Bank of Ukraine (NBU) disclosed more
details of its Oct. 20 decision to keep the key policy rate unchanged at 8.5% in the
minutes of its monetary policy committee meeting published on Nov. 1. They
revealed that seven out of ten members spoke for keeping the key policy rate at
8.5% while three members were for hiking it to 9.0%.
The committee members noted that the development of
inflation is generally in line with the trend jotted down in the NBU
macroeconomic forecast published in July. They noted that the acceleration of
consumer inflation and core inflation to 11.0% and 7.4% yoy was a bit lower
than expected mostly due to the exchange rate appreciation, which restrained
the prices for goods with imported components.
The seven committee members who spoke for keeping the
key policy rate at 8.5% noted that the current inflation development is close
to the NBU forecast. The recess in the cycle of monetary softening is an
adequate reaction to the newly emerged inflation factors.
While proposing to hike the key policy rate to 9.0%,
the three other committee members stated that increased inflation risks call
for a tighter policy. The proactive position of the regulator would maintain
confidence in the monetary policy.
Five committee members don’t expect the key policy
rate to change through the end of the year. Meanwhile, three members expect the
key policy rate to be hiked by 1.0pp, and two members look for a hike of 0.5pp.
Most committee members expect the key policy rate to be at 7.5-8.0% at the end
of 2022, while one member sees it at 9.0%.
Evgeniya Akhtyrko: Now, the
monetary policy committee members are not that certain about keeping the key policy
rate at 8.5% as they were at the prior meeting on Sept. 9. The current price situation
is shaky indeed. The development of consumer inflation for October and November
will be the ground for the next meeting of the monetary policy committee on
Dec. 9. If we don’t see a clear halt of the inflationary trend, the key policy
is likely to be hiked.
