Rising prices may spur Ukraine to third rate hike in October – media

16:55, 08 October 2018
Economy
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The hryvnia has become more volatile / Photo from bank.gov.ua

Prices are rising faster again as Ukraine suffers the knock-on effects of escalating global trade wars, while the central bank has also flagged the inflationary risks of Ukraine's not securing more aid from the International Monetary Fund, CNBC said with reference to Reuters.

Six out of the 14 analysts surveyed expect a rate increase by half a percentage point to 18.5 percent at the next monetary policy meeting, on October 25. One analyst expects a hike to 19 percent.

Six others expected rates to remain unchanged. One expected a rate cut.

Last month, the central bank raised the rate to 18.0 percent from 17.5 percent citing "a significant increase in external risks, which could prevent inflation from returning to its target."

The analysts forecast annual inflation speeding up to 9.6 percent in December from 8.6 percent expected in September. The State Statistics Service plans to publish September inflation data on Tuesday.

The central bank forecasts inflation at 8.9 percent in 2018, well above its initial target of six percent.

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IMF aid to Ukraine has effectively been frozen since April 2017 because of a slowdown in reforms, which has also held up financial assistance from other international donors, such as the European Union and the World Bank. It has also prevented Ukraine from issuing new eurobonds.

The central bank's reserves have shrunk by 11.5 percent since the beginning of the year to $16.6 billion as of the end of September. The hryvnia has become more volatile as foreign currency inflows dwindled and external debt payments rose.

That can worsen inflationary expectations, and the central bank has previously signalled it could continue tightening its monetary policy after four rate increases already in 2018.

The central bank had gradually been cutting the rate between 2015-2017 to 12.5 percent from 30 percent - during the time when Ukraine's IMF programme was on track.

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