Ukraine central bank cuts policy rate by 1.5pp to 16.5%
24 June 2016
The board of directors of the National Bank of Ukraine (NBU) decided on June 23 to cut its policy rate to 16.5% from 18.0%, according to an NBU press release. The move was the third in row monthly meeting during which the NBU decreased the rate by a total of 5.5pp from 22.0% as of mid-April.
The NBU identified slowing inflation risks as the main factor in its decision. (Ukraine’s CPI slowed to 7.5% yoy in May from 9.8% yoy in April.) It also cited revived external demand, with subsequent stronger export proceeds, and a strengthened hryvnia exchange rate. The NBU reaffirmed its inflation forecast at 12% (+/- 3pp) in 2016 and 8% (+/- 2pp) in 2017.
Alexander Paraschiy: With its pace of easing monetary policy, the NBU is demonstrating that we should expect more declines by the end of the summer. However, the Brexit vote implies more risks for the Ukrainian currency, which may play to prevent further monetary easing.
