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Economy 2020-06-15T06:33:04+03:00
Ukrainian news
NBU Cuts Discount Rate From 14% To 13% From April 14 And Retains Inflation Forecasts Of 9.1% And 6% For 2017 A

NBU Cuts Discount Rate From 14% To 13% From April 14 And Retains Inflation Forecasts Of 9.1% And 6% For 2017 And 2018

NBU, discount rate, forecast, inflation

The National Bank of Ukraine has cut the discount rate from 14% to 13% from April 14, 2017.

The press service of the National Bank of Ukraine announced this in a statement, Ukrainian News Agency reports.

The statement reads that the consumer inflation in March 2017 made 15.7% year over year.

"Price growth has accelerated primarily due to base effects and higher production costs. Actual acceleration of headline inflation was as expected, although at a lower trajectory than projected in the NBU's Inflation Report in January 2017. The NBU then projected inflation in March to accelerate to 16.4%," reads the statement.

The statement reads that the fundamental factors of the inflation remain controllable.

"Prudent fiscal and monetary policies against a backdrop of improved inflation expectations restrained acceleration of core inflation (in March 2017, 6.3% in annual terms)," reads the statement.

The statement reads that demand-pull pressure on prices has remained moderate, as evidenced by the anemic growth in retail goods turnover in the first months of the year.

The NBU says the revival of economic activity and the improvement in business outlook of enterprises contributed favorably to the recovery of labor demand.

The decision to cut the key policy rate to 13% is approved by NBU Board Decision On the Key Policy Rate No. 232-рш, dated April 13, 2017.

The next meeting of the NBU Board on monetary policy issues will be on May 25, 2017.

Also, the NBU has retained the inflation forecasts of 9.1% and 6% for 2017 and 2018 respectively.

The Ukrainian central bank notes that the situation on the forex market weakened the pressure on prices.

"The external price environment for Ukrainian exporters has become more favorable since early 2017 due to recovery in prices for steel, iron ore, and grains, with an export potential being further bolstered by record high grain and oil crop yields. Appreciation of the hryvnia since mid-January was underpinned by solid export revenues," reads the statement.

The central bank expects that the inflation in 2017-2019 will meet the announced targets (8% ± 2 pp for 2017, 6% ± 2 pp in 2018 and 5% ± 1 pp in 2019).

The central bank's inflation forecast for 2017 remains 9.1% and 6.0% in 2018.

The National Bank expects that in the second and the third quarters of 2017 inflation in annual terms will be in the double-digit range and volatile.

The statement reads that the central bank attributes this to the base effects, namely the administered price dynamics in 2016.

Inflation will only return to a one-digit range in the fourth quarter of 2017.

No significant deviations of core inflation from the current level (6.5%) are projected by the end of 2017.

Recovery of consumer demand and second-round effects from the higher food price inflation will be the inflation driving factors.

The NBU notes that the prices of unprocessed foods will rise at a faster pace in the following months driven by a number of factors. Firstly, global food prices are projected to move on an upward trajectory. Secondly, opening of the new markets will result in a lower supply of certain types of domestically produced foods in Ukraine.

As Ukrainian News Agency earlier reported, since March 4, 2015, the National Bank of Ukraine raised the discount rate from 19.5% to 30%.

Then, the central bank several times retained the discount rate at 30%.

On August 28, 2015, the NBU lowered it to 27% and to 22% on September 25, 2015.

Then the central bank lowered the discount rate from 22% to 19% on April 22, 2016, from 19% to 18% on May 27, 2016, and from 18% to 16.5% on June 24, 2016.

On July 29, 2016, the Regulator lowered the discount rate from 16.5% to 15.5%, on September 16, 2016 from 15.5% to 15%, from 15% to 14% on October 28, 2016 and retained it at 14% for December 2016 - March 2017.

In March 2017, consumer prices rose by 1.8%.

Foodstuff and soft drink prices in March rose by 1.1%, prices for clothes and footwear increased by 10.5%, cost of municipal services rose by 5.0%, of services related to health care rose by 0.4% and education by 0.2%.

Inflation in the period of January - March 2017 was 3.9%.

In March 2017, consumer prices rose by 15.1% year over year.

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