Photo from NBU
The central bank expects further growth in consumer demand, a decrease in investors' interest in Ukraine's debts, rising energy prices, and possible increase in gas prices on the domestic market.
Chairman of the Council of the National Bank of Ukraine (NBU) Bohdan Danylyshyn says the regulator has increased its key policy rate on the background of a slowdown in inflation due to a negative outlook for the further development of the situation.
The increase in the rate amid a slowdown in consumer price inflation, at first glance, seems a contradictory step, he wrote on Facebook.
At the same time, he explained that the decline in price growth in the first half of the year was due to temporary factors. Meanwhile, the NBU Board in its decision-making is guided by a forecast for further developments, which demonstrates possible grounds for raising the rate, rather than by a retrospective analysis.
According to Danylyshyn, the grounds are the further growth in consumer demand due to households' incomes rising, a decrease in investors' interest in Ukraine's sovereign debt obligations, persistent inflation expectations above the NBU's inflation targets, likelihood of further growth in world energy prices, as well as possible increase in 2018 gas prices and tariffs in the domestic market due to bringing them to import parity.
The official also added that an increase in the key policy rate might become one of the factors slowing economic growth. Nevertheless, this may lead to higher rates for government domestic bonds and NBU deposit certificates.
As UNIAN reported earlier, the National Bank decided to hike its key rate to 17.5% with its earlier decisions suggesting it be kept at 17% in April and May 2018.
Ukraine's highest key rate was set at 30% from March 4 to August 28, 2015.
Inflation in Ukraine in June 2018 slowed to 9.9% year-over-year (y-o-y) against 11.7% recorded in May 2018 y-o-y.