Ukrainian Institute for the Future -

The National Bank has decided that taming of rebellious prices is more important today than the availability of loans. Regulatory rush looks like a fire fighting.

On December 15, the National Bank quite unexpectedly, and for the second time in the current quarter, raised the discount rate (a monetary instrument, a control point of the cost of attracted and placed monetary resources) – from 13.5% in October to 14.5%. This was because of exceeding the planned rates of inflation. Thus, last month it reached as much as 13.6% on an annual basis. The forecast of consumer price growth at the level of 12.2% at the end of 2017 has, obviously, also failed. Some of the financiers tended to think that the decision of the NBU was a little bit late. Besides, the NBU Council stated already in July this year about the strengthening of the inflation risks and, as you know, the macroeconomic effect of the rate has a lag of several months. In addition, each such regulatory increase in the price of borrowing money somehow hits the business. Usually, in this situation, instead of granting credits to business activities, banks begin to buy the domestic government bonds and deposit certificates of the National Bank more actively. Will this result in a slowdown in already weak economic growth? The Chairman of the National Bank Council of Ukraine hinted that perhaps pessimists were right.