Central bank expects moderate inflation rate in coming months

The National Bank's Monetary Policy Committee (MPC) believes the inflation rate will be growing moderately in the months to come.

"Price growth will accelerate moderately in the coming months as a result of the hryvnia's depreciation in March, the MPC members expect. Inflation will nevertheless continue to be restrained by falling consumer demand and low energy prices. This, in the opinion of all MPC members, creates room to cut the key policy rate to support an economic recovery," reads the summary on the MPC's latest meeting of April 22, published on the NBU website on May 4.

All members of the MPC spoke unanimously in favor of easing monetary policy in April 2020.

However, given the high degree of uncertainty about the further impact of the pandemic on the global and Ukrainian economies, the MPC members differed on the size of the cut to the key policy rate.

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Two out of ten MPC members believe the key rate will further slide to 7% by year-end. Three members believe it should stand at 8% given uncertainty in developments in Ukraine and worldwide.

The sharper reduction in inflationary pressure than the one forecast gives the NBU room to make a deeper key policy rate cut, half of MPC members said. One of them expects reduction to 6.5%, and others – to 6% in 2020.

As UNIAN reported earlier, the National Bank Board decided on cutting the key policy rate from April 24 to a five-year low of 8%, making the latest reduction seventh in a row.

The National Bank still expects a reduction in the key policy rate to 7% by year-end, at the same time not ruling out the possibility of a greater easing of monetary policy this year in the event that lower consumer demand over quarantine measures and weakening business operations will put more pressure on inflation toward decline than the regulator expects today.