NBU head confirms task of switching to inflation targeting by late 2016

Governor of the National Bank of Ukraine (NBU) Valeriya Gontareva has confirmed the task of the central bank to switch to the inflation targeting regime by the end of 2016, she said at a press conference in Kyiv on Tuesday.

"We expect that the switch to the new regime [of inflation targeting] would allow creating environment where inflation would not be a reason of alarm of business and society, trust to the hryvnia would resume, and real income of population and business would not fall due to the increase of prices," she said.

Gontareva said that in September 2016 the NBU board approved a draft strategy for the monetary policy for the next four years, which is pending the approval of the new NBU board as soon as it is elected.

"The NBU strategy foresee the course of achieving inflation that is, as we believe, optimal for Ukraine. We believe that the optimal inflation for Ukraine is around 5%," she said.

Gontareva said that the NBU set the target for inflation at 12% for 2016, 8% for 2017, 6% in 2018 and 5% in 2019.

"The forecast for 2016 could vary within 3%, but our basic figure is 12% for the end of 2016," she said.

The NBU has improved standard tools for regulating liquidity, which are the condition for the successful switch to the inflation targeting regime.

"In July 2015, the NBU entered the secondary government domestic loan bond market offering the securties from its portfolio and the bank has sold the bonds worth UAH 1.6 billion. In December, the NBU started auctions with government domestic loan bonds and three auctions were held and bonds worth UAH 136 million with average coupon of 19.5% per annum were sold," she said.