**Ukraine’s Central Bank Keeps Interest Rates Steady Amid High Inflation**
The National Bank of Ukraine has decided to keep its benchmark interest rate at 15.5% for the second consecutive meeting, citing above-forecast inflation in May as a major concern. This decision was widely expected by analysts and investors, with over 80% of those polled by Kyiv-based investment house ICU predicting no change in rates.
The central bank’s governor, Andriy Pyshnyi, stated that inflation is likely to have reached its peak in May and will start to slow down in the summer months as the new harvest begins. He also pointed out that an improved outlook in the energy sector this year compared to last year will help reduce price growth. The bank’s main goal is to bring consumer price growth back towards its 5% target, which has been a challenge due to ongoing inflationary pressures.
**Inflation Pressures Persist**
While the central bank keeps interest rates steady for now, Pyshnyi hinted that if inflation pressures persist, they are ready to keep their main policy rate on hold for longer than initially indicated. This means that even if inflation starts to slow down in the summer, the bank may not raise interest rates as quickly as previously thought.
**War and Weather Risks**
The ongoing war against Russia remains a significant risk for Ukraine’s economy, according to Pyshnyi. Additionally, lower harvests due to cold spring weather pose another major risk for inflation and economic development. Agriculture is a crucial sector for the Ukrainian economy, with Ukraine being a global producer of grains and oilseeds.
**Impact on Economy**
The potential 10% decline in grain harvest this year compared to last year’s 56.7 million metric tons may have significant implications for the country’s economy. This could lead to increased food prices and potentially even higher inflation rates, which would put pressure on the central bank to reconsider its monetary policy.
**Conclusion**
In conclusion, while the decision to keep interest rates steady was expected, it highlights the ongoing challenges faced by Ukraine’s economy due to high inflation and external risks such as the war against Russia. The central bank will continue to closely monitor these factors and make adjustments as necessary to maintain economic stability and control inflation.
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