Ukraine central bank split on key policy rate in October, minutes show

The National Bank of Ukraine (NBU) disclosed more
details of its October decision to keep its key policy rate unchanged at
18.0% in the minutes of the monetary policy committee
meeting published on Nov. 5. They reveal that five committee members called for
keeping the key rate unchanged at 18.0%, splitting from the other five present
members who called for hiking it by 0.5pp to 18.5%.

The doves argued that the current rate creates
monetary conditions that are tight enough for controlling inflation and the
influence of previous rate hikes is not exhausted. In addition, they cited
Ukraine’s recent agreement with the IMF
on a Stand-By Arrangement (SBA), which is likely to positively affect the
confidence of the public and investors.

The hawks argued that a policy rate hike is needed to
mitigate such current inflation factors as worsened expectations, rising
consumer demand, fast growth of wages and an unfavorable price situation at the
external markets.

The committee members agreed that a further key policy
rate hike will follow should inflationary pressure increase.

Evgeniya Akhtyrko: We expect Ukraine to successfully complete its talks with the IMF on
the SBA loan by the time of the next committee meeting scheduled for Dec. 13. A
further rate hike is possible if inflation exceeds the NBU’s forecast and/or conditions on the external markets
deteriorate significantly.