REUTERS

Ukraine's central bank cut its main interest rate for the seventh time in a row on Thursday, to 8% from 10%, to support the economy as it lurches towards recession due to the coronavirus pandemic.

The cut is sharper than the expectations of a Reuters poll of analysts, Reuters said.

Read alsoFitch revises Ukraine's outlook to stable; affirms at 'B'

Strict lockdowns on businesses and people will cause the economy to contract by 5% this year, according to the central bank's revised estimate, the first such drop since 2015 and a big swing from an earlier forecast of 3.5% growth.

The looming recession has prompted President Volodymyr Zelensky's government to ask the International Monetary Fund for an $8 billion loan package, which remains conditional on parliament passing a banking reform bill.

The central bank expects a first IMF loan tranche to be disbursed in the second quarter of this year.

As well as wanting to support the economy, the central bank has headroom for rate cuts because hitherto tight monetary policy and low energy prices have brought inflation down to 2.3%, below its target range of around 5%.

At its last monetary policy meeting on March 13, the central bank cut its key rate to 10% from 11%.