At a meeting, the Council of the National Bank of Ukraine Approves the Monetary Policy Guidelines for 2017 and Medium Term (hereinafter - MP Guidelines).
In opening the meeting, Chairman of the NBU Council said: “For the first time in history, the key monetary document has been drafted through joint efforts of academia, the expert community, as well as the Higher Expert Council and the Public Council established at the NBU. The NBU Council taken on board the proposals submitted to it for consideration. In my view, we have managed to find a balance between different views, set out the priorities and deliver a quality document. The main thing is that implementation of the Monetary Policy Guidelines for 2017 should contribute to the recovery of economic growth at rates consistent with the Government’s and the NBU’s forecasts.
In accordance with Article 6 of the Law of Ukraine On the National Bank of Ukraine, the NBU Council, recognizes price stability as the primary objective of monetary policy. This being said, the NBU Board’s priority is to reduce inflation (in CPI terms) to single digits and maintain it at that level in the medium term.
The NBU Council sees low and stable inflation as a major contributor to a sustainable economic growth. low inflation is beneficial for economic welfare of businesses, households and the state.
The NBU Council underlines that in accordance with statutory requirements the NBU is charged with the tasks arising from the performance of its core function. The NBU shall:
- promote, among other things, the stability of the banking system without prejudice to the primary objective of price stability;
- facilitate sustainable economic growth and support the implementation of the Ukrainian government’s economic policy, provided that it is consistent with the price and financial stability goals.
The achievement of the financial stability goals along with maintaining a sustainable economic growth can become factors or even prerequisites for ensuring the price stability in the country.
The NBU will remain committed to a floating exchange rate policy. However, this does not mean allowing the exchange rate to move uncontrollably. As efforts to smooth out excessive exchange rate fluctuations pave the way for ensuring price and financial stability. This being said, the NBU intends to influence an exchange rate indirectly through the use of market instruments, such as interest rate policy. The role of currency interventions will diminish as the NBU phases out administrative restrictions. However, FX liberalization should be implemented in a gradual manner so as not to hamper achieving the objective of price and financial stability.