Page 57 - UKRRptFeb21

8.2 ​Central Bank policy rate
Key policy rate to be hiked in 2021, NBU anticipates. ​The National Bank of Ukraine (NBU) disclosed more details of its ​Jan. 21 decision to keep its key policy rate unchanged​ at 6.0% in the minutes of its monetary policy committee meeting published on Feb. 1. They revealed that eight out of ten committee members spoke for keeping the key policy rate unchanged.
The committee members noted that consumer inflation rose at the end of 2020 and reached the middle point of inflation target range of 4-6% yoy. However, inflation is expected to speed up, and it is likely to go beyond the inflation target range as soon as in January.
The NBU admits that the major factors of inflation boost are temporary and they are beyond the influence of monetary policy. A higher key policy rate will not mitigate such current inflation factors as the lower harvest of 2020, exchange rate effect, higher prices for energy resources and the hike of housing rates. The influence of these factors will wear off in 2H21 even without the employment of monetary tools, the central bank states.
Two committee members spoke for hiking the key policy rate to 6.5%. They underscored that the inflation pressure turned out to be higher than it was expected in the NBU’s macroeconomic forecast last October. A hike of the key policy rate is inevitable, and now is the time to do it, they maintained. The proactive position of the central bank would send a signal about the NBU’s readiness to ensure price stability.
Most committee members anticipate a moderate hike of key policy rate up to 6.5-7.0% in the next few months. This will alleviate a fundamental inflation pressure and will improve inflation expectations. Consumer inflation is expected to return to the inflation target range of 4-6% in the beginning of 2022.
Meanwhile, some committee members believe that the hike of the key policy rate will not be needed given the temporary nature of the current inflation factors and likely compensators like foreign capital inflow.
57​ UKRAINE Country Report​ February 2021 ​ ​www.intellinews.com