Ukraine central bank cuts policy rate by 1pp to 15.5%
29 July 2016
The board of directors of the National Bank of Ukraine (NBU) decided on July 28 to cut the policy rate by 1.0 pp to 15.5%, an NBU press release reported. It was the fourth consecutive policy rate cut since April 22, amounting to a 6.5pp total reduction from 22%. The board cited a strong slowing in the inflation rate to 6.9% yoy in June from 7.5% yoy in May as the main reason for its decision. This slowing was the result of tendencies on external markets that are continuing to generate excessive supply of foreign currency at the ForEx, the NBU said.
The NBU confirmed its 2016 inflation forecast at 12% (+/- 3pp) in 2016 and 8% (+/- 2pp) in 2017.
Alexander Paraschiy: This policy rate cut was widely expected, with the positive macro-statistics leaving no room for doubt. The only question was over the size of the reduction and whether further cuts are possible. In our view, a lot will depend on tendencies in September when business activity picks up and currency risks intensify for Ukraine. If nothing dramatic occurs, we can see another cut in the policy rate by 0.5-1.0pp on September 15.
