14 Apr 2022 15:03

National Bank of Ukraine holds policy rate at 10%

KYIV. April 14 (Interfax-Ukraine) - The National Bank of Ukraine has again decided to hold its key policy rate at 10%.

"Under the current conditions, the impact of the key policy rate on the functioning of the money market and the FX market remains limited. With this in mind, the key policy rate will stay flat at 10% until monetary transmission channels are effective again," the NBU said in a statement, posted on its website.

The NBU hiked its policy rate from 9% to 10% in January but has left it unchanged since then.

According to the NBU statement, inflation in Ukraine could exceed 20% in 2022, but will remain under control.

The regulator said inflation would be fueled by disruptions in production processes, logistics and transport infrastructure, and, as a result, the uneven distribution of supply across some regions.

Other factors include pass-through effects from the weakening of the hryvnia and high global energy prices, which will put pressure on fuel prices and prices of goods and services with energy-heavy production costs.

At the same time, measures taken by the NBU and the Ukrainian government will restrain the price growth.

These measures include a temporary fixing of the hryvnia exchange rate, which will limit the probable deterioration in expectations and the rise in prices of imported goods; a decrease in taxes, including the indirect taxation of imports; locking in public utility rates; and administrative regulation of prices for some foods and fuel.

Excessive supply of some agricultural crops will be an additional restraining factor due to limited exports.

"Moreover, after the monetary transmission channels are restored, the NBU will resume use of its key policy rate and other monetary instruments to control inflation expectations and gradually reduce inflation," the regulator said.