Slowdown in inflation accelerates key policy rate reduction - NBU
The press service of the National Banked said this in a statement following a meeting of the Monetary Policy Committee on the key policy rate.
“The accelerated reduction in the key policy rate became possible as inflationary pressures have eased more rapidly than previously projected. The November slowdown in consumer inflation to 5.1% means that the NBU reached its medium-term inflation target of 5 ± 1% a few months earlier than it predicted in its macroeconomic forecast,” reads the report.
According to the NBU, the key policy rate decreased also due to continued favorable conditions in the foreign exchange market. Specifically, the changes in inflationary dynamics were primarily driven by the hryvnia’s strengthening amid growing export earnings and steady inflows of foreign capital.
The stronger hryvnia, together with lower global energy prices and an expanded supply of certain foods, contributed to the deceleration in price growth.
Members of the committee estimated that the monetary policy easing will support economic growth without preventing inflation from stabilizing at approximately 5. “By contrast, continuing to maintain tight monetary conditions may result in the hryvnia becoming excessively strong, which would lead to economic imbalances,” the NBU added.
As Ukrinform reported, the Board of the National Bank of Ukraine decided to reduce its key policy rate by 2 pp to 13.5% per annum from December 13, 2019.
