Raising the key policy rate will have negative consequences for the Ukrainian economy.
Vitalii Lomakovych, founder and chairperson of the Growford Institute, wrote about this on his Facebook page.
“I have read the news that in March the National Bank of Ukraine plans to raise the key policy rate again from 10% to 11%. The National Bank of Ukraine often explained that it supposedly helped fight inflation. Experts of the Growford Institute are constantly researching the steps taken by our neighboring countries. The whole world faced a sharp rise in prices. But we see the opposite situation – their central banks do not worry that inflation exceeds interest rates. For example, in Estonia inflation in 2021 was 12%, in Lithuania – 10%. Although the European Central Bank keeps the key policy rate at 0%. Even in Moldova, which is economically less developed than Ukraine, the inflation rate is 14% and the key policy rate is 8.5%. Therefore, the fight against inflation by raising the key policy rate does not always give the result expected by the National Bank of Ukraine. And it will only have negative consequences for the Ukrainian economy. Don’t the leaders of the National Bank of Ukraine realize this?” – Lomakovych explains.