Monetary policy tightens to alleviate devaluation expectations

Monetary policy tightens to alleviate devaluation expectations



4 березня 2015 года
ICU

Yesterday, the NBU announced a series of measures to alleviate the devaluation expectations that had proliferated to the extent that it caused last week's currency crash. First, the bank raised its key policy from 19.5%, effective 6 February 2015, to 30%, effective today. Second, it said it would 'radically' reduce the volume of domestic market government bond purchases; last year, the total volume was UAH173bn, and to date this year it acquired UAH20bn, which is 6.5% less than in the same period last year. Third, it would strictly adhere to the declared ceiling of monetary base increase in 2015 of UAH91bn. In 2014, the monetary base rose 8.5% YoY. Fourth, it would streamline its earnings' transfer to state budget revenues via equal installments spread evenly over the year. By state budget law, the NBU must transfer UAH60bn in 2015, while in 2014 the volume was UAH20bn. All in all, these steps are all in the proper direction, especially in terms of reduced government debt monetization (i.e. domestic QE).

Источник: ICU

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