Tight monetary policy leads to slower inflation – National Bank of Ukraine

Tight monetary policy of the National Bank of Ukraine (NBU) in 2015 has helped to reduce inflation in the country, and the arguments about the negative impact of this policy on the economy were no more than value judgments, NBU Deputy Governor Dmytro Solohub said on 3S.TV.

”Let us remember the inflation at 61% at the end of May 2015. As of today, at the end of September, it is 7.8%. Foreign exchange reserves of the central bank amounted to $5 billion in March 2015, and now they are $15.5 billion. This is actually the result of the tight monetary policy,” Solohub said.

He noted that the arguments about NBU`s tight monetary policy hindering GDP growth were no more than value judgments, because in the present circumstances, the excessive easing of monetary policy might result in another unrest in the foreign exchange market

”I have repeatedly asked this question: let us make the rate at 2%. Will everyone invest and develop businesses, for example, in Cherkasy, Vinnytsia or Chernihiv regions? Or is it easier to take money at such a low rate, to buy the currency, hedge themselves and sit quiet?” Solohub said.

The NBU official emphasized that on the one hand, the public policy was designed to provide economic growth and jobs, and on the other hand, the purchasing power of the population, which is directly dependent on the level of inflation.

As UNIAN reported earlier, starting from March 4, 2015 the NBU raised the discount rate to the highest ever level in the history of Ukrainian banking system – to 30%, up from 19.5% per annum.

The regulator`s decision was a consequence of the collapse of the national currency in February 2015 to a historic low at UAH 30.01 to the dollar, and the subsequent maximum inflation at the level of 60.9% in annual terms, recorded in April 2015.

On September 16, the NBU set the discount rate at 15% per annum. At the same time, the National Bank announced a further easing of monetary policy in the event of further weakening of the risks to price stability. The next meeting of the NBU Board on monetary policy will be held this week, on October 27.

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