Ukraine central bank cuts policy rate 1pp to 13%

The board of directors of Ukraine’s central bank (NBU) decided on April 13 to cut its policy rate by 1.0pp to 13.0%, according to its press-release. March inflation was 15.1% yoy, lower than the 16.4% yoy growth that was projected, while the hryvnia remained stable at the ForEx, the NBU said.

No impact of the govenrment’s trade blockade was detected on CPI, the NBU said. Current tendencies promise consumer prices will increase 9.1% YTD in 2017, which is in line with the NBU’s initial target range of 8% +/- 2%. As a result, the board expects to perform further monetary easing, possibly at its next meeting on May 25.

Alexander Paraschiy: A decision on a policy rate cut was an expected event, taking into account a flow of positive news – the IMF wire, no trade blockade impact, the stable hryvnia. On the other hand, inflation still remains high and the NBU head’s resignation might have pointed to a flat policy rate till her successor arrived. Our expectation was the rate would be lowered by symbolic 0.5pp.

Nevertheless, the board of directors decided to show its optimistism on the hryvnia and inflation, disregarding the change in management. We need to see who will be Gontareva’s successor in order to build a view on the pace of further monetary easing. However, we’re confident the general direction on rate cuts and ForEx liberalization will remain on track.