Ukraine hikes rate to 30pc after inflation soars and currency falls
Ukraine’s central bank will today raise its benchmark refinancing rate to 30 per cent from 19.5 per cent, the head of the central bank said, seeking to rein in rocketing inflation and stem persistent currency weakness.
The Ukrainian hryvnia has halved in value so far in 2015 after shedding 50 per cent last year. Last week, it hit record lows of below 30 to the dollar after political upheaval and conflict pushed the ex-Soviet republic to the brink of bankruptcy.
The new interest rate is the highest for 15 years and will inflict further pain on an economy expected to shrink by 5.5 per cent this year. Kiev sees inflation at 26 per cent in 2015, though Prime Minister Arseniy Yatsenyuk has said that may be “too optimistic”.
Explaining the rate hike at a news briefing, central bank chief Valeriia Gontareva said the bank believed “the threat of inflation had risen strongly due to negative consequences from currency market panic”. The bank will also extend a rule obliging companies to sell 75 per cent of their foreign currency earnings, among other measures to help stabilise the hryvnia, which Gontareva said she hoped would return to a level of 20-22 to the dollar “quickly”.