The Board of the National Bank of Ukraine (NBU) welcomes the NBU Council’s decision on maintaining consistent monetary policy in the Monetary Policy Guidelines for 2018 and Medium Term. Main features of the monetary policy, namely its objectives and principles, remain unchanged with regard to the Policy Guidelines for 2017 and Medium Term.

"The approved document reflects a common vision of the NBU Council and Board regarding the importance to pursue a consistent monetary policy with the view of fostering confidence in the hryvnia," said Acting Governor Yakiv Smolii.

As earlier reported, in July 2017 the NBU Board approved and submitted Proposals to the Monetary Policy Guidelines for 2018 and Medium Term (hereinafter the Monitory Policy Guidelines) for consideration of the NBU Council. On 12 September, the NBU Council adopted the Monetary Policy Guidelines that were communicated to the Verkhovna Rada of Ukraine on 15 September.

The document envisages that the NBU will continue implementing monetary policy within the framework of the inflation targeting regime.

The medium-term inflation target has been confirmed at 5% ±1 pp to be achieved gradually pursuant to the unaltered target path:

• December 2018: 6% ±2 pp
• December 2019: 5% ±1 pp
• December 2020 and beyond: 5% ±1 pp

At the same time, with the aim of enhancing transparency and accountability of monetary policy, quarterly inflation targets have been introduced in addition to the year-end inflation targets:

• March 2018: 7.5% ±2 pp
• June 2018: 7% ±2 pp
• September 2018: 6.5% ±2 pp
• December 2018: 6% ±2 pp
• March 2019: 5.75% ±2 pp
• June 2019: 5.5 % ±2 pp
• September 2019: 5.25% ±2 pp
• December 2019 and beyond: 5% ±1 pp.

The persistency in achieving inflation targets will improve inflation expectations and facilitate understanding and predictability of the NBU actions, according to NBU Deputy Governor Dmytro Sologub.

Key policy rate remains the main instrument in achieving inflation targets. If the projected inflation rate is higher than the target, the NBU will tighten its monetary policy in order to bring projections near to the target. Accordingly, if inflation is projected to be lower than the target, the NBU will ease its monetary policy. These actions ensure that inflation in the mid-term will always be maintained close to its target.

The flexible exchange rate of the hryvnia will continue to stay in place and will be determined by the market, while the NBU will refrain from focusing its monetary policy on maintaining a certain FX level or range.

The NBU will still conduct FX market interventions with the aim of:

• building up international reserves
• smoothing out exchange rate fluctuations
• facilitating the transmission mechanism of the key policy rate as the main monetary tool.

To ensure the achievement of the second important monetary policy goal related to financial stability, the NBU activity will be concentrated on:

• effective redistribution of resources by the financial system
• adequate assessment and perception of risks by market participants
• strengthening the resilience of the financial system, warding off systemic crisis.

The NBU will meet its objective of promoting financial stability through adequate micro- and macroprudential regulation and supervision.

While elaborating monetary policy decisions, the NBU will further give consideration to the need of economic growth provided this does not run contrary to achieving price stability goals. Low and stable inflation is the main prerequisite to a sustainable economic growth, which can be delivered on by the central bank. While excessive inflation undermines confidence of economic agents, making it harder for the latter to make consumer and investment decisions, which underpins the economic upturn.

Since sustainable economic growth is enabled through successful reforms, the NBU and the government will make every effort to remain committed to the economic and financial reform path as was agreed on with international financial institutions.

In order to meet all of its objectives, the NBU will be guided by the following monetary policy principles:

• giving priority to delivering and maintaining price stability
• maintaining a floating exchange rate
• forward-looking decision making
• promoting institutional, financial and operational independence of the NBU
• ensuring transparency and accountability of NBU’s actions.