Ukraine Cuts Rates for Third Month as CPI Fades Further

  • Benchmark down to 16.5% from 18%; survey saw reduction to 17%
  • National currency’s rally helps tame consumer-price growth

Ukraine cut borrowing costs for a third month as inflation continued to ease and the hryvnia reached its strongest level since January.

The central bank lowered its key policy rate to 16.5 percent from 18 percent, according to a statement Thursday. Six of 10 economists in a Bloomberg survey predicted a reduction to 17 percent, while four saw the benchmark being left unchanged.

Ukrainian monetary-policy makers are seeking to boost lending as inflation slows from last year’s high of almost 61 percent. The economy is expanding as it continues to heal following an 18-month recession. Rocked by political turmoil at the start of 2016, the nation’s currency is rebounding on promises from the new government to resume disbursements from a $17.5 billion bailout and raised prices for Ukrainian exports.

“The central bank will continue easing monetary policy to support the economic recovery as long as it doesn’t conflict with achieving the inflation target” of 12 percent, the bank said in its statement. “Inflation pressure eased because of balanced monetary policy and hryvnia strengthening after a favorable environment on global commodities markets.”

Central bank Governor Valeriya Gontareva told reporters in the capital, Kiev, that she sees the pre-conditions for another rate cut. The central bank has been buying foreign currency to boost its reserves, with offers on the market “significantly” exceeding demand, she said.

Even so, household consumption remains weak and economic growth is driven by foreign trade and investments, according to Gontareva.

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