Ukraine holds rate but to ease further as inflation falls

    Ukraine's central bank left its benchmark discount rate unchanged at 22.0 percent to anchor inflation expectations but said it would continue to ease its monetary policy as disinflation takes hold.
    The National Bank of Ukraine (NBU), which has cut its rate by 800 basis points this year after raising it by 2,350 points from April 2014 through March this year, added that it had maintained its inflation forecast of 12 percent by the end of 2016.
    "The fundamental factors underpinning the disinflationary trend remain relevant," the central bank said, adding these factors include weak domestic demand, low global commodity prices, a balanced current account and sound fiscal policy.
    The NBU added that there had been some recovery in economic activity in September with implementation of the cease fire agreement contributing to faster growth in mining.
    The financial system is also continuing to stabilize, with rising domestic currency deposits while foreign currency deposits expanded for the first time in two years in September.
    Inflationary expectations have also become more anchored, but the central bank said it had maintained its rate due to continuing inflationary risks due to the lagged effects of the devaluation of the hryvnia on the prices of seasonal goods and further increases in administered prices.
    Inflation in October is expected to be relatively high due to lower than expected harvest of crops as well as increases in heating prices, the NBU said.
    Ukraine's inflation rate eased to 51.9 percent in September from 52.8 percent in August and a year-high of 60.9 percent in April.
    The hryvnia was trading at 23.2 to the U.S. dollar today, down 32 percent this year.

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