NBU keeps key policy rate at 6%

The National Bank of Ukraine (NBU) announced on Sept.
3 that it decided not to change its key policy rate at its monetary policy
board meeting that day, keeping it at 6%. Soft monetary policy will maintain
economic renewal under moderate inflation and high uncertainty regarding future
pandemic developments in Ukraine and in the world, the NBU noted.

In July-August, consumer inflation was below the NBU’s target range
of 4-6%. The revival of consumer demand and the price growth for natural gas
and fuel was counterbalanced by a seasonal correction of prices for raw food
products. The NBU believes that the further trend of consumer inflation will
depend on the pace of economic renewal.

The central bank emphasized that the key assumption of
its forecast is continued IMF cooperation. This cooperation is vital not only
for financing the budget deficit but also for securing the support of other
international partners and investors. These resources will be channeled to
finance the epidemic-control measures and infrastructure projects which should
revive still-weak investment activity.

The key risk for the macrofinancial stability is the
extended term and the strengthening of the pandemic as well as the increasing
of quarantine restrictions.

Evgeniya Akhtyrko: Keeping the
key policy rate unchanged is an adequate decision for the current macroeconomic
situation. Although consumer inflation remains relatively low, businesses are
not rushing to lower their risk assessments of Ukraine’s economy for various
reasons. In particular, the government has not recently succeeded in placing
short-term local debt at around 7.8%. Commercial
banks are afraid to lower interest rates for term deposits as this might cause
a run on deposits.