The National Bank of Ukraine (NBU) has continued easing its monetary policy, cutting the key rate by 2 percentage points to a two-year low of 13.5% per annum effective December 13.

"The Board of the National Bank of Ukraine has decided to cut the key policy rate to 13.5% per annum effective December 13, 2019. The NBU speeds up the monetary policy easing, as the rapid appreciation of the hryvnia makes inflationary pressures decline faster than expected," the NBU's press service said on December 12.

In November 2019, consumer inflation decreased sharply, reaching 5.1% year-over-year (y-o-y), which was below the NBU's latest forecast. In such a way, inflation reached the medium-term target of 5%, set by the NBU in 2015.

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The steady disinflation has been driven by a gradual easing of underlying pressures on prices, reflected in a slowdown of core inflation, and by lower energy prices.

Inflation slowed markedly due to both the strengthening of the hryvnia and an improvement in inflation expectations. The above factors neutralized the pressure on prices from robust consumer demand and worse harvest of some vegetables, the report said.

The regulator says the hryvnia strengthened due to several reasons. In October–November, the excess supply of foreign currency was mainly driven by proceeds from Ukrainian exports, in particular thanks to a record harvest of grain and oil crops, and selling foreign currency coming from borrowings of state-owned companies.

Moreover, foreigners continued to invest in hryvnia government bonds, but it did not have major influence on the foreign exchange market, unlike in the past months.

"At the same time, the NBU actively purchased excess foreign currency to replenish international reserves. Net foreign exchange interventions have totaled over US$5.5 billion since the start of 2019," the press service added.

As UNIAN reported earlier, inflation in Ukraine in November 2019 slowed to 5.1% y-o-y against 6.5% recorded in October 2019 y-o-y.

In October, the National Bank cut the key policy rate to 15.5% per annum for the third time in a row, after lowering it in September and July.