The NBU leaves prime rate at 6%, an increase is possible in 2021

UKRAINE - In Brief 22 Oct 2020 by Dmytro Boyarchuk
Today, the NBU Board again left prime rate unchanged at 6%. Despite September consumer inflation was modest (+0.5% m/m or +2.3% y/y), the Central bank anticipates inflation speed up over the upcoming months. That was the main reason behind the decision. The NBU lowered inflation forecast down to +4.1% ytd in 2020 from +4.7% ytd estimated previously. For 2021 CPI is expected to speed up to +6.5% ytd (+5.5% ytd estimated previously). GDP growth forecast was left unchanged -6.0% y/y in 2020 and +4.0% y/y in 2021. Current accounts are expected to result in 3.0% of GDP surplus in 2020 and to switch into the red in 2021 down to 2.0% of GDP deficit. The NBU assumes continued cooperation with the IMF and does not expect any strict lockdown in the economy. The NBU mentions possible prime rate increase in 2021 if inflation tendency strengthens. Next meeting of the Board will be on December 10th.

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