Ukraine's c.bank lowers key rate to 15% in fourth consecutive wartime cut

Credit: REUTERS/VALENTYN OGIRENKO

By Olena Harmash

KYIV, Dec 14 (Reuters) - Ukraine's central bank lowered its key interest rate to 15% from 16% on Thursday, its fourth cut in a row amid slowing inflation, despite what the regulator said was "great uncertainty" over how long the war with Russia will rage on.

Consumer inflation slowed to a three-year low of 5.1% year-on-year in November, the central bank said, citing a strong harvest and improving business sentiment despite the war, which is now more than 21 months old and has no end in sight.

"This decision comes along with a decline in inflation and an improvement in inflation expectations, which will contribute to the sustained attractiveness of hryvnia savings instruments," the central bank said.

Governor Andriy Pyshnyi noted risks to Kyiv's reliance on financial assistance from Western allies, but said he expected external financing to "become regular again in the near future".

He said his hopes were boosted by the fact that Ukraine managed to secure a new $900 million tranche from the International Monetary Fund and successfully completed its second review of a four-year programme with the lender.

Ukraine has relied heavily on external financing to hold out against Russia's invasion, which saw the economy contract by almost a third last year and forced the government to channel all revenue to the defence of the country.

Kyiv is now hoping to secure two major aid packages from the United States and European Union for next year, but both packages have encountered resistance and become bogged down in debate.

The central bank praised Ukraine's shipping corridor in the Black Sea that it has built up in recent months without Russia's approval after Moscow pulled out of a U.N.-brokered deal that secured a wartime grain corridor through the Black Sea.

"The expansion of maritime logistics has fully replaced the suspended 'grain corridor' and mitigates the effects of the trade and transportation restrictions imposed by some EU countries," it said.

It said it saw no likely reduction in "significant" risks to security until 2025 and that it would expect additional economic losses and inflationary pressure if they continue.

"Great uncertainty over the duration and intensity of the full-scale war persists," it said.

(Reporting by Olena Harmash; editing by Tom Balmforth and Sharon Singleton)

((Olena.Harmash@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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