{"id":164153,"date":"2020-01-30T09:55:46","date_gmt":"2020-01-30T14:55:46","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=164153"},"modified":"2020-01-30T09:43:00","modified_gmt":"2020-01-30T14:43:00","slug":"ukraine-cuts-rate-6th-time-sees-rate-at-7-end-2020","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/01\/ukraine-cuts-rate-6th-time-sees-rate-at-7-end-2020\/","title":{"rendered":"Ukraine cuts rate 6th time, sees rate at 7% end-2020"},"content":{"rendered":"
January 30, 2020<\/div>
\r\n<\/div><\/div>

By CentralBankNews.info<\/u><\/a><\/p>\n

Ukraine’s central bank cut its rate for the sixth time as it reached its inflation target earlier than envisaged and said it expects to lower its rate further to 7.0% percent by the end of 2020, with the fastest pace of rate cuts in the first half of this year.<\/p>\n

The National Bank of Ukraine (NBU) cut its key policy rate by 150 basis points to 11.0 percent and has now cut it by a total of 700 points since it began its easing cycle in April 2019.<\/p>\n

A steady rise in Ukraine’s hryvnia from September 2018 through December 2019 along with low energy and food prices has pushed down Ukraine’s inflation rate faster than expected.<\/p>\n

In December headline inflation fell to a 6-year low of 4.1 percent from 5.1 percent in November and 9.8 percent in December 2018, in the lower end of NBU’s target of 5.0 percent, plus\/minus 1 percentage point.<\/p>\n

“The strengthening of the hryvnia was the key factor driving the rapid disinflation seen in late 2019, offsetting the effects of robust consumer demand,” NBU said.<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

NBU expects inflation to remain below its target range starting in January and most of this year before accelerating to 4.8 percent in the fourth quarter of 2020, mainly because the rise in the hryvnia will continue to be reflected in import prices, low energy prices will hold back domestic fuel prices, and food price inflation should be insignificant in the absence of supply shocks.<\/p>\n

Administered prices, however, will grow somewhat faster than in 2019, mainly as taxes on tobacco products continue to converge to European levels, NBU said.<\/p>\n

Based on its expectation of lower interest rates, NBU expects inflation in 2021 and 2022 to remain within its medium-term target, supported by prudent fiscal policy, low energy prices and higher productivity.<\/p>\n

If inflation risks materialize, NBU cautioned it could slow the pace of rate cuts and conversely if reforms are implemented faster than expected along with significant inflows of investment, the rate could be cut at an even faster pace.
\nIn 2019 the hryvnia appreciated almost 20 percent but since late December it has given back some of those gains to trade at 24.9 to the U.S. dollar today, down almost 5 percent this year.<\/p>\n

Ukraine’s economy is expected to continue to strengthen in coming years and NBU confirmed its earlier forecast for growth this year of 3.5 percent, up from 3.3 percent in 2019, rising to around 4.0 percent in following years.<\/p>\n

The current account deficit narrowed to only 0.7 percent of gross domestic product in 2019, partly after Ukraine’s state-owned gas company Naftogaz received $2.9 billion from Russia’s Gazprom after a legal battle was settled.<\/p>\n

In 2020-22 NBU expects a current account deficit of 3-4 percent of GDP, a level it described as “acceptable,” with the deficit caused by large investment imports and lower revenue from natural gas transit amid greater capital inflows to the private sector.
\n<\/a><\/p>\n

\n
<\/div>\n<\/div>\n

The National Bank of Ukraine released the following statement:<\/p>\n

“The Board of the National Bank of Ukraine has decided to cut the key policy rate to 11% per annum effective 31\u00a0January 2020. The NBU continues to ease its monetary policy with the aim of maintaining inflation at the target level of 5% and supporting steady economic growth.<\/em><\/strong><\/div>\n
In 2019 consumer inflation declined to a six-year low of 4.1% (versus 9.8% in 2018).<\/strong>\u00a0The NBU thus achieved its medium-term inflation target of 5% \u00b1 1 pp (declared in 2015) earlier than expected. The strengthening of the hryvnia was the key factor driving the rapid disinflation seen in late 2019, offsetting the effects of robust consumer demand.<\/div>\n
\n
Throughout most of 2020, inflation will be below the 5\u00b11\u00a0pp target range, but it will return to the target range at the end of the year<\/strong><\/div>\n<\/div>\n
According to the NBU\u2019s estimates, inflation continues to slow. It will be below the 5\u00b11\u00a0pp target range starting in January and throughout most of the year. However, it will accelerate in Q4 to 4.8% at year-end 2020.<\/div>\n
This will be due to the following factors. First, the last year\u2019s appreciation of the hryvnia will continue to be reflected in prices of imported goods and products with a large share of imported inputs. Second, continued relatively low global energy prices will curb the rise in domestic fuel prices. Third, in the absence of supply shocks, food price inflation will be insignificant owing to expected higher yields of fruit and vegetables.<\/div>\n
At the same time, administered prices will grow somewhat faster than last year, mainly as excise taxes on tobacco products continue to converge with European levels.<\/div>\n
Driven by the monetary policy easing, inflation in 2021\u20132022 will remain within the medium-term target of 5+\/-1%\u00a0pp. The further steady, low pace of inflation will also be due to the following factors:<\/div>\n