ADVERTISEMENT

Ukraine Backed Softer Rate Hike With Russian Tensions In Sights

Ukraine Backed Softer Rate Hike With Russian Tensions In Sights

The Ukrainian central bank agreed to a rate hike with more tightening in the pipeline at its last meeting, according to minutes from the session released Monday.

Seven out of 10 members of the central bank’s committee on monetary issues voted to raise the key rate to 9%, seeking to combat inflation, the minutes showed. The remaining three sought a hike to 9.5%.

Even as the central bank sees inflation as underestimated by its own forecasts, rate setters approved the 0.5% increase as anticipated by the market while steeper tightening could have been perceived as an emergency hike amid a Russian military buildup near Ukraine’s borders and coronavirus lockdown. 

Ukraine Backed Softer Rate Hike With Russian Tensions In Sights
  • Some board members argued the key rate decision should mainly aim to reign in inflationary expectations, with more than 60% of households expecting prices to grow more than 10% over the next 12 months.
  • The hawks at the central bank pointed out that most inflationary drivers have already become permanent and systemic.
  • Some policy makers called for faster additional measures to magnify the impact of previous rate hikes, including regulating liquidity in the banking system.
  • Most members of the central bank’s board agreed to continue raising borrowing costs in the upcoming meetings.

©2021 Bloomberg L.P.