The National Bank of Ukraine has decided to lower the refinancing rate to 22 percent per annum as of September 25 from the current rate of 27 percent which has been in place since Aug. 28, 2015, after a cut from 30 percent.
This is stipulated in NBU resolution No. 627 on the regulation of the monetary and credit market dated Sept. 24, 2015, the NBU said in a statement.
“The National Bank of Ukraine moves ahead with plans to ease the monetary policy stance, which was launched last month. A gradual departure from the policy of ‘expensive money’ was made possible due to a steady alleviation of the risks to price stability in Ukraine,” the bank said.
The firm disinflation trend is the result of the joint efforts of the NBU and the Ukrainian government, it said.
“The sound monetary and fiscal policy enabled us to contain the demand-side inflation, and stabilize the foreign exchange market and anchor inflationary expectations,” the banks
The factors contributing to curbing inflation prevail throughout the forecast horizon. They include a stable money market, low commodity prices on global markets, and a further decline in inflationary expectations.
“The latter was underpinned by the completion of the debt operation to restructure Ukraine’s sovereign debt, the ongoing successful cooperation with the International Monetary Fund, and support from other international partners,” the bank said.
At the same time, scheduled adjustments of administered prices and a long-term increase in wages and social benefits initiated by the government will not exert significant upward pressure on inflation.
In view of the above, according to the estimates of the NBU, inflation is projected to follow a downward path. As a result, the Consumer Price Index growth will moderately, to 12 percent by the end of 2016.
In view of the above, the central bank will continue to ease its monetary policy stance. The NBU said that this move is prudent and takes into account the need to remain on a disinflation path and reach a mid-term inflation objective of 5% year-over-year.
The NBU raised the refinancing rate to 30 percent per annum on March 4, 2015. Until then, the rate was set at 19.5 percent since Feb. 6, and 14 percent from Nov. 13, 2014.
The last time when the NBU set a higher rate was in 2000: from March 24, 2000, it was cut to 32 percent from 35 percent per annum, then on April 10 it was cut to 29 percent and further to 27 percent on Aug. 15 per annum. In 2001, the NBU gradually, at six phases, lowered the rate to 12.5 percent per annum.
