Support of the IMF for Raising Interest Rates in Ukraine

by Olha Povaliaieva
Monday, January 31, 2022
Support of the IMF for Raising Interest Rates in Ukraine

During the round table of National Bank of Ukraine announced the approval of actions regarding raising the interest rate

"Almost all the world countries are now struggling to overcome the inflation caused by the pandemic and the disruption of established trade and economic relations. Therefore, the interest rate, gradually increasing in Ukraine by a few percentage points, is normal. And we support that policy," said Vahram Stepanian, the permanent representative of the Currency fund in Ukraine from the IMF,

This was a consequence of the decision of the National Bank of Ukraine to raise the interest rate by 1 item — from 9% to 10%. An increase of 1℅ is also being considered in March of this year. Thus, a cycle of monetary consolidation will begin in Ukraine. Such a step would contribute to addressing decisively the challenges posed by the new inflationary factors. The National Bank does not exclude the possibility of a return to lower rates. However, the actual implementation of the forecast is not possible until November-December 2022. Of course, the inflation targeting policy of the Ukrainian National Bank will be gradual and take into account domestic factors.

"Inflationary pressures will increase. The pandemic is having an effect. Central banks around the world must face such challenges. For many countries, inflation is above the inflation target, but economic recovery and inflationary pressures vary from country to country. And you have to consider internal factors," said Stepanian, stressing the correctness of the decision made by the management of the NBU.

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