Page 57 - UKRRptJul19

NBU says. The National Bank of Ukraine (NBU) disclosed more details of its June decision to keep its key policy rate unchanged at 17.5% in its minutes of the monetary policy committee meeting published on June 18. It revealed that seven committee members called for keeping the key policy rate unchanged, while one member called for lowering it by 0.5pp.
The majority of committee members noted that inflationary risks have increased since the previous revision of the key policy rate in April. Keeping the key policy rate at the current level should restrict the influence of these risks, pushing inflation down to its 2020 target of 5%. Meanwhile, the committee members agreed that the monetary softening cycle might be renewed if the fundamental inflationary pressure declines and inflationary expectations improve.
Accelerating consumer demand is the highest domestic risk, the NBU said. Retail continues to grow fast, while wage growth hasn't slowed, contrary to its expectations, the NBU noted. The demand is also fueled by ever-increasing consumer crediting.
Some committee members were less optimistic regarding the prospect for getting IMF financing because of the uncertainty regarding the formation of the new government and budget procedure. Given peak repayments on external debt in the fall, this situation might result in increased volatility on the ForEx, the NBU noted.
Evgeniya Akhtyrko of Concorde Capital said in a note: “We expect the central bank to suspend its monetary softening cycle until a positive decision by the IMF on resuming financial assistance to Ukraine, which is not likely to happen earlier than October. We also expect that the inflationary pressure is not likely to lower significantly during the summer months, being fueled by a disproportion between demand and supply for key consumer goods.”
57 UKRAINE Country Report July 2019 www.intellinews.com