The NBU Board makes monetary policy decisions with a view to achieving price and financial stability, and supporting sustainable economic growth. The Board makes decisions on the key policy rate, which is the main monetary policy instrument.
The NBU takes a transparent approach to monetary policy, and takes and communicates decisions according to the published Schedule of NBU Board meetings on monetary policy issues.
The Board can also make decisions related to required reserves, FX interventions, administrative restrictions in the FX market, and other monetary policy instruments.
The Monetary policy decision-making process at the National Bank of Ukraine comprises five key stages:
Stage I. Preparation of proposals on monetary policy decisions by the NBU staff
A week prior to the meetings of the MPC and the NBU Board on monetary policy issues, a working meeting of the heads of the NBU departments involved in formulating and implementing monetary policy takes place. The relevant departments include:
- Monetary Policy and Economic Analysis Department
- Open Markets Department
- Financial Stability Department
- Statistics and Reporting Department
NBU Board members are invited to take part in the discussion.
At this meeting, the participants outline a range of issues to be included in the agenda of the meetings of the MPC and the NBU Board on monetary policy issues and identify the necessary analytical materials used as an input for monetary policy decision-making.
Presentation materials prepared by the departments contain the macroeconomic forecast, a broad assessment of the economic situation and monetary indicators, the identification of possible risks to financial stability, as well as proposals on changes to the monetary policy framework.
Stage II. The silence period on monetary policy
The NBU maintains a so-called 7-day silence period on monetary policy (also called a quiet period) before making and unveiling a monetary policy decision. This period begins on the last Thursday that precedes the Board’s monetary policy meeting, and ends at 2 p.m. on the day of the meeting, at the same time that the Board makes public its monetary policy move on the NBU’s official website.
During this period, the NBU Board members and other members of the Monetary Policy Committee, along with the rest of NBU employees, must not discuss the NBU’s monetary policy issues with mass media, banks, experts, investors, and other stakeholders – whether on or off record. The silence period also implies that mass media may not publish NBU representatives’ interviews, comments, or other public materials that were prepared before the silence period went into effect but that contain statements pertaining to monetary policy.
The silence period, which is common practice among inflation-targeting central banks, is intended to prevent public speculations around an upcoming monetary policy decision of the NBU, as they may have an ambiguous effect on the expectations of financial market participants, increase uncertainty, and trigger excessive market volatility.
Stage III. Meetings of the Monetary Policy Committee
Meetings of the Monetary Policy Committee play a key role in the monetary policy decision-making process, as the MPC serves as a forum for discussions, the exchange of opinions and reaching consensus.
The MPC meetings take place on the eve of the meetings of the Board of the National Bank on monetary policy issues. The meetings are attended by the members of the NBU Board, and directors of the departments involved in the monetary policy decision making process.
At such meetings, representatives from these departments present technical contributions prepared by the staff on the macroeconomic forecast, outlook for future developments in the money and foreign exchange markets, financial stability, and share the results of the assessment and expertise with the members of the NBU Board.
At the MPC meetings, the Committee members also discuss the key strategic and analytical documents produced by the NBU, notably proposals with regard to the Monetary Policy Guidelines and the Inflation Report.
Stage IV. Meetings of the Board of the National Bank on monetary policy issues
Meetings of the Board of the National Bank on monetary policy issues take place in accordance with a pre-announced schedule (meetings are scheduled from 10:00 a.m. to 12:00 p.m.). At the meetings, the Board members contemplate proposals from the NBU staff on the need to modify the monetary and foreign exchange policy framework, proposals with regard to main parameters of operations with assets and liabilities for the purpose of current banking system liquidity regulation and other issues included in the MPC meeting agenda.
Following a discussion of the proposals from the staff, monetary policy decisions shall be taken through an open vote and by a vote majority of the Board members present at the meeting.
Stage V. Announcement and communication of monetary policy decisions
Two hours after the NBU Board ends its monetary policy meeting, at 2 p.m., the NBU puts out on its official website a press release outlining the NBU Board’s monetary policy decisions. At the same time, the NBU Governor gives a press briefing to announce and explain the decision made by the NBU Board.