NBU confirms 5% mid-term inflation target, aims to promote crediting

The Council of the National Bank of Ukraine (NBU)
announced on Sept. 10 the approval of its “Basic Principles of Monetary
Policy for 2021 and the Mid-Term,” which had been submitted by NBU Board.
The document is based on the NBU Board’s official Monetary Policy Strategy approved in
2018.

The document states that the NBU will continue its
policy of inflation-targeting with a target rate of 5% +/- 1pp, which involves
maintaining a flexible exchange rate regime without requiring a specific level.
The document also notes that the NBU might allow for short-term deviations of
consumer inflation beyond the mentioned range in order “to avoid losses in
economic development.”

The development of crediting will be a special focus
of monetary policy, according to the document. The predictability of inflation,
combined with comprehensive monetary policy, will be the basis for the
development of the financial system and the accumulation of short-term and
long-term resources available for lending.

NBU Governor Kyrylo Shevchenko emphasized that “the
National Bank has set ambitious objectives of not only maintaining a moderate
pace of price growth, but also of reviving lending … for the development of the
real sector of the economy.”

Evgeniya Akhtyrko: Overall,
the new document reinstates the principles of monetary policy developed and
maintained by the NBU after having adopted its inflation-targeting policy in
2015. Importantly, it keeps unchanged the inflation target range of 4-6% and
rules out fixating the exchange rate.

The document also reflects the aspirations of the
current power brokers in pursuing the goal of increasing the availability of
credit resources for reviving the economy.