Interest Rate in Ukraine
Ukraine - Interest Rate
Central Bank raises the key policy rate to 17.5%
At its 12 July meeting, the National Bank of Ukraine (NBU) decided to hike the key policy rate by 50 basis points to 17.50%, catching market analysts by surprise. It also resumed monetary tightening after leaving the policy rate unchanged in the two previous meetings, and the move brought the key interest rate to its highest level since May 2016.
Increased upside risks with regards to short- and medium-term inflation, as well as elevated inflation expectations, prompted the rate hike. Despite inflation moderating to 9.9% in June, which was below the NBU’s forecast, it remained notably above the Bank’s re-confirmed medium-term target of 5.0% plus or minus 1.0 percentage point. The Bank sees inflation at risk of deviating up from its projections in the coming quarters, fueled by higher-than-expected domestic demand on the back of higher wages and growing remittances from abroad.
In its communiqué, the Central Bank also noted that by increasing its key policy rate, it aimed to address the threat of postponed financing from the IMF that would likely translate into lower interest in Ukrainian sovereign debt on the part of investors. Ukraine has also felt the effects of capital outflows from emerging markets as investors turned their attention to the U.S. due to the stronger dollar, rising interest rates and faster growth. Lastly, the interest rate hike should support hryvnia exchange rates, which have already benefited from monetary policy tightening cycle in the face of an emerging markets currency selloff.
Looking ahead, the Bank signaled that its current monetary policy stance is based on the assumption that Ukraine continues implementing the structural reforms laid out by the IMF. The BNU left its inflation forecast for the end of 2018 unchanged at 8.9% and it expects inflation to return to its target range by mid-2019, ending the year at 5.8%. Nevertheless, further rate hikes this year cannot be completely dismissed. The NBU remains fully determined to tightening its monetary policy further in case of intensifying inflationary pressures or a deteriorating relationship with the IMF.
The next monetary policy meeting is scheduled for 6 September.
Met the why particular Consensus Forecast panelists are still taking the recent policy rate hike into consideration. They see the key policy rate ending 2018 at 15.87. For 2019, panelists expect the key policy rate to fall to 13.12% by year-end.
Ukraine - Interest Rate Data
|Policy Interest Rate (%)||6.50||14.00||22.00||14.00||14.50|
5 years of economic forecasts for more than 30 economic indicators.
Ukraine Interest Rate Chart
Source: National Bank of Ukraine.
|Bond Yield||19.00||0.0 %||Jul 27|
|Exchange Rate||26.98||0.30 %||Aug 07|
|Stock Market||514||0.21 %||Aug 07|
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August 11, 2018
Consumer prices fell 0.7% month-on-month in July, following a flat reading in June.
July 27, 2018
According to data released by the Statistical Institute, industrial output rose 2.2% in annual terms in June, decelerating from May’s 2.5% increase.
July 16, 2018
Consumer prices were stable in month-on-month terms for the second consecutive month in June (May: +0.0% month-on-month).
July 12, 2018
At its 12 July meeting, the National Bank of Ukraine (NBU) decided to hike the key policy rate by 50 basis points to 17.50%, catching market analysts by surprise.
June 27, 2018
According to data released by the Statistical Institute, industrial output rose 2.5% in annual terms in May, decelerating from April’s 3.0% increase.