The NBU keeps the refinancing rate at its minimum / REUTERS

The Board of the National Bank of Ukraine (NBU) has decided to keep its key policy rate unchanged – at 6% per annum.

"As before, a longer-lasting coronavirus pandemic, the further spread of the disease and stricter quarantine measures remain the key risks to macrofinancial stability," the NBU said in its conclusions posted on the official website on October 22.

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According to the NBU, other risks also remain significant. They include: the negative impact of certain court rulings on macrofinancial stability; an escalation of the military conflict in eastern Ukraine or on the country's borders and; the higher volatility of global food prices, driven by global climate change and the risk of stronger protectionist measures.

"Given the above balance of risks and expectations that inflation will overshoot its target range in 2021, the NBU Board decided to keep the key policy rate unchanged, at 6%," it said.

"The sustained monetary policy easing is aimed at supporting economic recovery and bringing inflation to the target."

Monetary policy

With the high level of uncertainty, the NBU's future monetary policy will mainly depend on how the pandemic develops and what budgetary parameters are adopted.

"If the pick-up in domestic demand and business activity fails to persist due to an increase in the number of COVID-19 cases, the NBU will be able to support the economy by cutting its key policy rate further. Conversely, the NBU will also be prepared to raise the key policy rate in 2021 if inflationary pressures intensify," the NBU quoted NBU Governor Kyrylo Shevchenko as saying.

According to him, the NBU will continue to keep a balance between stimulating the economy and maintaining moderate inflation. The NBU's decisions will also be largely guided by the established parameters of fiscal support for the economy. This support is also expected to be significant next year.

Previous developments

As of June 12, the Central Bank reduced its refinancing rate to a historic low of 6% per annum. In July and September, it was fixed 6%.