Question of optimal timing to return to floating exchange rate remains open - NBU Board member

MOSCOW. June 17 (Interfax) - The question of when it will be most optimal to reinstate a floating exchange rate remains open, even though the fixed exchange rate is showing substantial curves, member of the Board of the National Bank of Ukraine (NBU) Viktor Kozyuk said.

"The fixed exchange rate is generating substantial curves and is risky in the long term, the question about the optimal timing for such a transition remains open," the Ukrainian media quoted Kozyuk as saying on social media.

The reinstatement of a floating exchange rate should be preceded by minimal possible work of the interest rate channel, as without making hryvnia-denominated assets more attractive, there is a probability that the forex market could continue to lose balance, he said.

Even though the banking sector proved to be more resilient to shocks than in 2014, problems keep accumulating in the economy, the expert said.

In particular, a slow restoration process needs a boost from investments and consumption, which, in turn, will require certainty and a mitigation of threats, while recovery is most likely to require the broadening of even trade imbalance and heavier pressure on the country's reserves, he said.

Furthermore, powerful "monetary overhang" is getting formed, which should be eliminated via a combination of decisions on the interest rate and the relaunch of the transmission mechanism, Kozyuk said.