Prime rate revised upwards by 0.5 ppt, readiness for further increase declared

UKRAINE - In Brief 04 Mar 2021 by Dmytro Boyarchuk
The NBU Board increased the prime rate by 0.5ppt up to 6.5%, according to the NBU press-release. The decision was a bit belated but still somewhat surprising after a dovish communication in January. Experts (consensus forecast, including ourselves) anticipated the prime rate to remain unchanged for now, which hints that the NBU communication was pretty much misleading last time. In any case, the step was inevitable and in essence it’s good that the NBU has finally recognized reality. In February we estimate the CPI will break 7% ceiling. NBU Governor Kyrylo Shevchenko could have ignored reality until the next meeting but most likely criticism would only have grown in this case. At the press-release, the NBU mentioned growing cases of COVID-19 cases, which raises risks for the economic recovery. The prime minister reported today a third wave of the COVID-19 pandemic in Ukraine and mentioned a possible lockdown over the very near future. This time, the communication of the NBU appears obviously hawkish. The regulator stated strongly that “The NBU stands ready to raise its key policy rate more resolutely in order to curb fundamental inflationary pressures." We project consumer inflation to speed up to +6.7% ytd or +7.3% y/y in 2021. This tendency will push the prime rate to 8% over the coming months. The next meeting of the Board will take place on April 22, 2021.

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this or its contents.