The Ukrainian central bank (NBU) announced on Thursday that it would raise its key rate to 25%, against 10% currently, in an attempt to stem inflation and protect the hryvnia, the national currency, from the economic repercussions of the lasting Russian invasion. for almost 100 days.
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“National Bank’s board of directors has decided to raise the key interest rate to 25% per annum,” the NBU wrote in a statement, the highest level since 2015.
The aim of this “interventionist policy” is “to protect citizens’ incomes and savings, increase the attractiveness of hryvnia assets and reduce pressure on the foreign exchange market,” the statement continued.
By raising the key rate sharply to 25%, the Ukrainian central bank wishes above all to “strengthen (its) capacity (…) to ensure the stability of the exchange rate and contain inflationary processes”.
As a result in particular of the war with Russia, inflation soared to 16.4% in April over one year, according to official figures published by the central bank. It could reach 20% at the end of the year over twelve months, according to initial estimates.
Such a measure should, according to the NBU, also make it possible to limit the “threat” of “dollarization” of the Ukrainian economy, ie the risk of abandoning the hryvnia in favor of the American dollar.
The Ukrainian currency was trading Thursday afternoon around 29.5 hvrynia per dollar, at a relatively stable level since the start of the Russian invasion.
The head of the central bank, Kirill Shevchenko, also revealed Thursday that he wanted to start discussions with the International Monetary Fund (IMF) to develop “a new economic program” for Ukraine.
The Russian invasion at the end of February had a very strong impact on the Ukrainian economy, precipitating the rise in inflation and increasing the pressure on central bank reserves.