(Bloomberg) -- Ukrainian policymakers agreed that there was room for more policy easing as the central bank seeks to reduce the key rate to 18% by the end of this year, even as it acknowledged a deterioration in the balance of risks.
Officials led by Governor Andriy Pyshnyi trimmed borrowing costs by two percentage points to 20% this month after inflation dropped into single digits. Nine of the 11 Monetary Policy Committee’s members supported the move, while two were in favor of cutting the rate to 19%, a summary of the Sept. 14 meeting published on the bank’s website Monday showed.
The National Bank of Ukraine plans to continue the rate-cut cycle as long as inflation slows steadily and the currency market remains stable. Rate setters said that easing needs to continue to be coordinated with their hryvnia exchange-rate liberalization strategy.
“During the discussion participants agreed that the NBU will press forward with the cycle of key policy rate reductions, provided that inflation slows further and the FX market retains its sustainability over the forecast horizon,” the central bank said.
Read more: Ukraine Presses Ahead With Rate Cuts as War-Time Inflation Eases
Still, the bank “remains conservative considering that the balance of risks has partially worsened,” according to the statement.
The risks associated with the duration and progress of the Kremlin’s war in Ukraine and the potential issue of insufficient international financial support remain relevant. Grain exports are limited by an embargo on imports to some European Union members and Russia’s blocking of the supply routes from Ukrainian Black Sea ports.
Ukraine will fulfill its financial obligations to its foreign partners and despite uncertainties about international financing for next year, the central bank will maintain foreign reserves “at a high level,” the NBU said.
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