POLL-Ukraine to keep main interest rate at 6% due to inflation fears
* Reuters interest rate survey data: // realtime / verb = Open / url = cpurl: //apps.cp./Apps/cb-polls? RIC = UACBIR% 3DECI
* IPC reuters poll data: // realtime / verb = Open / url = cpurl: //apps.cp./Apps/econ-polls? RIC = UACPIY% 3DECI
KYIV, Dec. 7 (Reuters) – Ukraine will keep its key interest rate at an all-time low of 6% this week, weighing on the need to support a virus-hit economy with an expected rise in inflation and delays in obtaining foreign aid loans, a Reuters poll showed on Monday.
The National Bank of Ukraine gradually reduced the rate to 6% in June, from 18% in April 2019.
Some 14 of the 15 analysts predict the rate will remain at 6% at the next monetary policy meeting on Thursday. One analyst predicted a rate cut to 5.5%, saying the NBU had the option to do so because inflation was still relatively low – 2.6% year-on-year in October.
Reuters poll suggests inflation could accelerate to 3.4% in November and 6.1% next year from 4.2% at the end of 2020, thanks to the increase in the minimum wage by the government from January 1 and the increase in government spending expected in December.
“A current low level of inflation on the one hand and expectations of its acceleration in the next one to two months will prevent the central bank from changing the interest rate,” said Oleksandr Pecherytsyn of Credit Agricole Bank Ukraine. Sergiy Nikolaychuk of brokerage firm ICU said relatively low inflation and a stable currency could allow the central bank to postpone a possible rate hike until next spring.
But he said the NBU could not risk cutting the rate due to delays in Ukraine getting new loans from the International Monetary Fund and a 20% pay hike from early 2021.
Ukraine received $ 2.1 billion from the IMF shortly after signing a new deal in June. But the program derailed amid concerns over Kiev’s reform performance. (Edited by Matthias Williams, Larry King)