{"id":166385,"date":"2020-03-12T13:55:40","date_gmt":"2020-03-12T17:55:40","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=166385"},"modified":"2020-03-12T13:23:12","modified_gmt":"2020-03-12T17:23:12","slug":"ukraine-cuts-rate-7th-time-limited-impact-from-virus","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/03\/ukraine-cuts-rate-7th-time-limited-impact-from-virus\/","title":{"rendered":"Ukraine cuts rate 7th time, limited impact from virus"},"content":{"rendered":"
March 12, 2020<\/div>
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By CentralBankNews.info<\/u><\/a>
\nUkraine’s central bank lowered its policy rate for the 7th time to boost the economy further as inflationary pressures are declining faster than expected as it continues with its plan to lower the rate to 7.0 percent by the end of this year.
\nThe National Bank of Ukraine (NBU) cut its rate by another 100 basis points to 10.0 percent and has now cut it by 800 points since it began the easing cycle in April 2019.
\nIn deciding on the pace of cutting its rate to 7.0 percent, NBU said it was closely monitoring the spread of the coronavirus and its impact on the domestic and global economy, the response of other governments and central banks, and progress in talks with the International Monetary Fund on a new aid agreement.
\n“If there are favorable developments, and if the new Ukrainian government speeds up reform, the NBU will be able to ease its monetary policy more quickly” but conversely if “above risks materialize, the NBU will respond quickly by deploying the monetary tools if has at its disposal,” the central bank said.
\nAlthough the spread of the coronavirus has had a “limited or neutral” impact on the country’s economy despite increased nervousness in financial markets, the central bank noted the global spread could, if realized, drive the global economy into recession and cause a significant slowdown in Ukraine’s economy by hitting trade and making it more difficult for its to obtain financing.
\nBut so far, NBU said its exports were continuing to rise while import prices, especially for energy, were falling faster than export prices, and overall effect of lower energy prices on Ukraine’s economy and inflation will be mixed, adding to uncertainty.
\nUkraine’s inflation rate fell to 2.4 percent in February, below the central bank’s target of 5.0 percent, plus\/minus 1 percentage point.
\nUkraine’s parliament has not yet passed legislation dealing with land and banking reforms that are needed for final approval of a new $5.5 billion, 3-year loan package that was preliminarily agreed with the IMF.
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\u00a0 \u00a0 \u00a0<\/span>The National Bank of Ukraine issued the following statement:<\/span><\/span><\/div>\n

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“The Board of the National Bank of Ukraine has decided to cut the key policy rate to 10% per annum effective 13\u00a0March 2020. The NBU continues its monetary policy easing, as predicted, in order to bring inflation back to its target range of 5%\u00a0+\/-\u00a01 pp and to support economic growth in Ukraine amid a cooling global economy.<\/em><\/span><\/div>\n
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The first months of the year show that inflationary pressures are waning faster than the NBU expected<\/span><\/div>\n<\/blockquote>\n
In January\u2013February, consumer inflation declined faster than foreseen in the forecast trajectory (reaching 3.2%\u00a0yoy in January and 2.4% in February), remaining below the target range of 5%\u00a0+\/-\u00a01\u00a0pp. Core inflation was also lower than forecast during this period.<\/div>\n
The faster disinflation was driven by the sustained effects of the last year\u2019s hryvnia appreciation on prices of goods, large supplies of the majority of raw foods, and lower energy prices. These factors offset the effect of robust consumer demand, which was bolstered by the continued growth in real household income.<\/div>\n
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In January the NBU forecast inflation at 4.8% as of the end of 2020, but this forecast may be reviewed in April depending on further developments<\/span><\/div>\n<\/blockquote>\n
So far, the global spread of the novel coronavirus has had a limited or neutral impact on the economy of Ukraine. Ukraine\u2019s exports continue to rise. Further increases in physical volumes of exports have more than offset certain declines in prices for some of the goods the country exports. At the same time, import prices (especially energy prices) are declining even faster than export prices.<\/div>\n
Uncertainty over the spread of the novel coronavirus, and stronger turbulence on financial and commodity markets saw the Ukrainian FX market respond with deteriorated sentiment and increased nervousness.<\/div>\n
However, the following consequences of the spread of the coronavirus have not yet impacted the economic activity and inflation in Ukraine:<\/div>\n