Ukraine's central bank keeps key rate at 18%

The National Bank of Ukraine decided to maintain the key rate at 18%, according to the central bank's press service.

The decision comes after the rate was increased twice – to 17.5% in July and to 18% in September.

In September consumer inflation was at 8.9% in annual terms, exceeding both the target ceiling (6.5% ± 2 p.p at the end of 3Q), and the regulator's July forecast (8.3%).

At the same time, the underlying inflationary pressure remains strong. This is reflected in the sustained high reading of core inflation (8.7% yoy in September), which is above the NBU’s July projections. In particular: domestic demand remaining high and further growth in production costs, including labor costs, put an upward pressure on prices; the hryvnia weakening against the US dollar in July–August influenced prices of some goods, especially imported ones; and the rapid growth in global crude oil prices seen in the past months passed through to fuel prices and contributed to higher cost of other goods and services.

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It is noted that the fundamental inflationary pressure remains significant, as prices see pressure from the ongoing significant domestic demand and a further increase in production costs, as well as a weakening of the hryvnia exchange rate to the dollar and the rapid rise in world oil prices in recent months.

“The above factors and the approaching presidential and parliamentary elections to take place next year affected the inflation expectations. In particular, expectations of households deteriorated. Businesses, banks, and financial analysts maintain high inflation expectations, at levels much above the NBU’s inflation targets,” the document says.

As UNIAN reported earlier, in September, the National Bank raised the key rate to 18% after raising it to 17.5% in July.

The maximum key rate in Ukraine's history at 30% was recorded in Ukraine from March 4 to August 28, 2015.