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Ukraine central bank says rate change may be back on agenda

Ukraine central bank says rate change may be back on agenda
By Reuters
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By Natalia Zinets

KYIV - Ukraine's central bank said on Wednesday that it may consider changing its key interest rate for the first time since the start of the war at a monetary policy meeting on June 2.

Ukraine froze its key interest rate at 10% following Russia's invasion on Feb. 24 despite the fact that inflation surged to 16.4% in April, citing the high level of uncertainty and limited effect of monetary transmission in wartime.

"The financial system and the economy are gradually returning to market principles," the central bank said in an emailed response to a query on whether a rate hike was likely.

For this reason members of the monetary policy committee at a meeting next week "will consider how significant a change has occurred to conditions for returning to the use of the interest rate as a monetary policy instrument," the statement said.

Russia's invasion has devastated the economy and triggered the banking system's first losses since 2017.

But the number of small businesses that had suspended their work in April fell to 26% from 73% in March, according to a survey by the European Business Association, the union of businesses operating in Ukraine.

Before the war, the central bank raised its main interest rate to 10% from 9%, crossing into double digits for the first time since April 2020.

It said at the time it could hike rates again to try to tackle persistently high inflation. But that plan was interrupted by the invasion.

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