Analysts divided on chances of Ukraine rate cut as election looms

FILE PHOTO:  Headquarters of Ukrainian central bank is seen in central Kiev
FILE PHOTO: The headquarters of Ukrainian central bank is seen in central Kiev, Ukraine, March 3, 2016. REUTERS/Valentyn Ogirenko/File Photo

April 8, 2019

KIEV (Reuters) – A slowdown in Ukrainian inflation is increasing pressure on the central bank to cut its main interest rate, but analysts are divided on whether a cut will happen in April as a presidential election looms, a Reuters survey showed on Monday.

Seven of 13 analysts polled by Reuters forecast a cut of at least 0.5 percentage points at the central bank’s next meeting on April 24, while the other six expected the bank will make no change.

The bank has kept its rate at 18 percent since last September in an effort to bring inflation back in line with a target of 5 percent.

At the last monetary meeting in March, the bank stated that political unpredictability prevented it from policy softening despite expectations that inflation will decline this year.

Analysts see annual inflation slowing to 8.4 percent in March and to 8.0 by the end of 2019, from 8.8 percent in February.

At the same time, Ukraine’s economy outlook may justify lower lending costs, given growth looks set to weaken to 2.7 percent in 2019 from 3.3 percent last year.

The second round of Ukraine’s presidential election is set for April 21, with incumbent Petro Poroshenko and comic actor Volodymyr Zelenskiy, a political novice, to face off for the country’s approval.

Zelenskiy won the first round in March with a score almost twice as high as Poroshenko, but his views on Ukraine’s economic policies remain unclear.

(Reporting by Natalia Zinets; Editing by David Holmes)

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