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policy rate might result in a surge in consumer inflation in 2021.
Two committee members favoured cutting the key policy rate by 250 bps to 11.0%, arguing that a drastic cut in the key policy rate is more appropriate in terms of significant inflation cooling. They noted that the volatility of the exchange rate in January was in “an acceptable range”, and its influence on inflationary expectations will be limited.
This group also noted that a faster cut in the key policy rate should not have an adverse effect on the banking sector in terms of runs on UAH-denominated savings deposits, as the bank’s interest rates will remain high enough to be an attractive investment instrument.
The committee's remaining two members advocated cutting the key policy rate by 350 bps to 10%, arguing that there are high risks that inflation will be lower than currently projected. Therefore, a drastic cut in the key policy rate would be justified.
“The NBU board, which is the final decision-maker on the key policy rate, opted for a more drastic cut, although the majority of committee members favoured a softer approach. It's our view that the intensified monetary softening was the proper reaction of the regulator to inflation cooling faster than expected. Overall, the revealed positions of the monetary policy committee members demonstrate the NBU’s increased confidence in the sustainability of positive trends in Ukraine’s economy,” Evgeniya Akhtyrko of Concorde Capital said in a note.
2.3 Politics - misc
Ukrainian President Zelenskiy accepted on February 11 the resignation of Presidential Office Head Andriy Bohdan, appointing as his replacement Andriy Yermak, who has served as his aide since May. Zelenskiy said Bohdan’s resignation was prompted by “conflicts,”, which is widely acknowledged as Yermak’s months-long rivalry with Bohdan in advising Zelenskiy. “There are conflicts. They interfere with work. I have always been against such conflicts, since they have no victors, nor any ties. Unfortunately. So we either lose time, or we lose people. But all those who work in the Office, they are professional people. So we will lose someone 100%. Because you can’t live in constant conflict. That’s all,” Zelenskiy said of the situation in an interview with the Interfax-Ukraine news agency published on February 11. Among his current office staff, Zelenskiy said he has known two or three employees for a long time, while he became acquainted with the others only since the election campaign of early 2019.
As of March 1, Ukrainians need an international passport to travel to Russia. Previously, they could travel to Russia with a domestic passport booklet or the new plastic ID card, introduced in 2016. Under the relevant Ukrainian Cabinet of Ministers’ decree of Dec. 18, Ukrainians now in Russia can come home using their domestic passports of ID cards. About 40% of Ukrainians have international passports. Obtaining one involves traveling to a regional capital, paying up to $50 and waiting up to one month.
Ukraine to cancel sale of Motor Sich to Chinese investors in March, media report A final decision by Ukraine’s Antimonopoly Committee to stop the sale of Motor Sich (MSICH UK), the leading aviation engines producer, to Beijing Skyrizon Aviation is expected in March, a buzzfeednews.com article of February 18 states citing a Ukrainian official. According to the source, this
6 UKRAINE Country Report March 2020 www.intellinews.com
