POLL-Market split on Ukraine rates despite high inflation

By Natalia Zinets

KYIV, June 15 (Reuters) – Analysts are divided on whether Ukraine’s central bank will raise its key interest rate this week or binary options robot ex4200 48p keep it at 7.5% as it balances the need to restrain inflation with helping the economy out of recession, a Reuters poll showed on Tuesday.

The government had forecast a 4% growth spurt in 2021 after a sharp contraction of 4% last year in the face of coronavirus lockdowns, but the economy shrank 2% in the first quarter.

Seven out of 15 analysts polled by Reuters think that high inflation will prompt the National Bank of Ukraine (NBU) to raise the rate to 8% or 8.5% on Thursday.Inflation jumped to 9.5% in May, up from 8.4% in April and 5% in December.

The inflationary risks are the dominant factor, said Alfa-Bank Ukraine’s Oleksiy Blinov, who forecasts an increase of one percentage point.

The other eight contributors believe the rate will remain unchanged, saying that the factors boosting inflation are temporary and will ease in the second half of the year.

Moreover, the central bank has raised rates twice already this year, prompting overseas investment that has strengthened the hryvnia, making exports less competitive and loans more expensive, analysts said.

“The expected good harvest of grain, oilseeds and sugar beets should provide a strong disinflationary effect in 2H21,” said Sergiy Nikolaychuk, of broker ICU.

Nikolaychuk expects the central bank to hold its rate at 7.5%.

The central bank has already bought $415 million of excess supply on the local interbank forex market in June to keep the hryvnia in check.The currency strengthened on Tuesday to less than 27 to the dollar for the first time since last July.

Foreign investors have increased their investment in Ukrainian government bonds by almost $377 million this month and by $858 million since the start of 2021.

The interest rate increases “have already contributed to the inflows of portfolio investments into the country and exchange-rate strengthening”, Nikolaychuk said.

It is unlikely that additional stimulus through this channel is currently needed, he added.(Editing by Matthias Williams and David Goodman)

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