The National Bank of Ukraine takes measures to reduce inflation in Ukraine
On 1 December 2011, Governor of the National Bank of Ukraine Sergiy Arbuzov presented the NBU’s assessment of the outlook for future inflation over the next year when giving answers to questions put to him at the meeting with foreign representatives from investment companies and funds.
Sergiy Arbuzov reminded that the National Bank and the Government plan to reduce inflation to 5% in 2014 in accordance with the joint memorandum signed between the National Bank and the Government.
"When this target is achieved, we will take all measures needed to maintain inflation rate at 5%. We consider it to be the optimal inflation rate for the economic development of Ukraine,” added the NBU Governor.
Sergiy Arbuzov pointed out that inflation is not expected to exceed a single-digit level next year, according to estimates made by the NBU. Furthermore, he indicated that Ukraine is committed to achieving a gradual decline in inflation under the Stand-By Arrangement with the International Monetary Fund.
When giving answers to questions regarding the exchange rate of the domestic currency that were put by representatives from investment companies and funds, the Governor of the National Bank of Ukraine dismissed the speculation that the National Bank of Ukraine had been trying to prop up the hryvnia as groundless. "The key reason for this is that the balance of payments has remained favourable over the last year. We are making efforts to put things right with regard to the demand for cash foreign currency from households. The implementation of certain measures has already reduced the demand for cash foreign currency from households 3 times, or even 4 times,” indicated the Governor of the National Bank of Ukraine and added that earlier daily demand for cash foreign exchange exceeded supply of cash foreign exchange by USD 150 million, whereas today this figure is below USD 50 million.
“Today we distinguish between the demand for cash foreign exchange from households and from business. We clearly see challenges we currently face in this sphere and are aware of the reserves available. We will improve shortcomings and I feel confident that there is nothing that threatens stability,” summed up the Governor of the National Bank of Ukraine.
In the course of the meeting, the sides discussed issued related to the mid-term and long-term development of the domestic banking sector. When discussing this issue, the Governor of the National Bank of Ukraine pointed out that capitalization of the banking system had increased, assets had expanded and household funds had been attracted. The banks have made profits over the last month.
In addition, Sergiy Arbuzov reminded that NBU Resolution “On Certain Issues related to the Money Market Regulation” No 407 of 15 November 2011 came into force on 30 November 2011, under which required reserve ratio for short-term foreign currency funds and foreign currency deposits from households and legal entities had be increased from 6% to 7.5%, which would enhance banks’ liquidity.
“The is no point in overstating the situation with regard to those banks that experience a shortage of liquidity as the tender for the provision of liquidity support to banks, which was held last week, showed that the National Bank of Ukraine had received bids worth only UAH 44.5 million, with the total amount of the loan granted by the National Bank of Ukraine amounting to UAH 1 billion,” stressed Sergiy Arbuzov.
Sergiy Arbuzov drew attention to the fact that the National Bank of Ukraine keeps monitoring the situation in the euro zone in order to prevent the economic problems facing other countries from penetrating the economy of Ukraine.
“The monetary policy pursued by the National Bank of Ukraine is in line with the economic situation in Ukraine. The National Bank of Ukraine provides maximum support to investors willing to work with the domestic currency and invest in the real economy,” stated the Governor of the National Bank of Ukraine.