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independence and common sense.” Rozhakova and fellow deputy governor Dmytro Sologub are the last survivors of the Central Bank leadership that shut down 100 insolvent banks in the wake of the 2014-2015 crisis. In a Facebook posting, Rozhkova said the bank council voted the reprimand because of an interview the pair gave the Kyiv Post last month. In a separate interview, Sologub told Interfax-Ukraine that last summer’s purge of the central bank Board reduced the IMF’s trust in the bank to “ground zero.”
8.2 ​Central Bank policy rate
The National Bank of Ukraine (NBU) kept its key policy rate at 6% ​at the meeting on October 23. The NBU announced on October 22 that it decided not to change its key policy rate at its monetary policy board meeting that day, keeping it at 6%. Keeping a soft monetary policy is aimed at maintaining economic renewal and reaching the inflation target, the NBU noted in a statement published on its website.
In September, consumer inflation was below the NBU’s target range of 4-6%. Due to the increased supply of food, inflation slowed to 2.3% y/y. This factor neutralized the inflationary pressure caused by hryvnia devaluation, price growth for energy products, the revival of economic activity and consumer demand.
Taking into account the weak inflation in 3Q20, the NBU revised downward its forecast of consumer inflation to 4.1% y/y in 2020. The economic revival, soft monetary policy and growing prices for energy products will boost consumer inflation, the NBU expects.
The NBU kept unchanged its 2020 GDP forecast of a 6.0% y/y drop. In 2021, the economy will return to growth of 4.2% y/y, being driven by private consumption.
The NBU expects the current account surplus to reach 2.9% of GDP in 2020. In the following year, the current account balance will turn to a deficit of 2.3% of GDP. The deficit of the current account will result from increased consumer demand and declining natural gas transit.
The central bank emphasized that the key assumption of its forecast is continued cooperation with the IMF. The delay or suspension of the program might not only result in slower economic revival, but also in deterioration of inflation and devaluation expectations.
With IMF support, Ukraine’s gross international reserves will stay around $29-30bn in 2021-2022, the NBU estimates.
The major risk of the NBU’s forecast is an extended COVID pandemic and the reinforcement of quarantine restrictions, the statement said.
So far, soft monetary policy seems to be not a very effective tool for boosting inflation in Ukraine, which could stimulate economic revival. Although consumer inflation remains relatively low, businesses are not rushing to lower their risk assessments of Ukraine’s economy for various reasons. In particular, the government has been unable to improve its receipts from primary local debt placements, even amid ​continuous interest rate hikes in recent weeks​.
50​ UKRAINE Country Report​ November 2020 ​ ​www.intellinews.com