UPDATE 2-Ukraine central bank welcomes IMF progress after rate pause

Ukraine's central bank kept its key rate unchanged at 18 percent on Thursday and said the good progress in loan negotiations with the International Monetary Fund had improved the inflation outlook.

The rate pause was in line with analysts' expectations even though, according to a Reuters poll this week, they predict inflation will creep into double digits in November and December before slowing next year. It was 10 percent in November.

Ukraine has secured a $3.9 billion loan deal with the IMF to tide it across two elections in 2019 in the shadow of rising tensions with Moscow. The authorities imposed martial law in November, citing the threat of a full-scale Russian invasion.

Ukraine can expect the first tranche by Christmas, Governor Yakiv Smoliy told a news conference. The IMF executive board, which must sign off on the loan, meets on Dec 18.

"We expect a tranche in the range of 1.4-1.9 billion dollars. This is a preliminary forecast," Smoliy said.

The bank said monetary conditions were sufficiently tight to bring inflation down to its medium-term target of 5 percent by 2020, adding that inflation risks had weakened since its last rate-setting meeting.

Risks to that target include the uncertainty caused by near year's elections, and the impact on exporters of a standoff with Russia over the Kerch Strait and the Azov Sea, a statement said.

In November Russia fired on and seized three Ukrainian ships travelling through the Kerch Strait to the Azov Sea, which shares a coastline with both Ukraine and Russia.

Kiev accuses Moscow of an economic blockade by submitting vessels travelling to its ports to spurious and lengthy checks. However, Deputy Central Bank Governor Dmitry Sologub said there had been no drop in foreign exchange earnings from the crisis.

Smoliy told Reuters in an interview last week that the central bank would press on with inflation targeting despite the elections next year, and that the bank had enough forex reserves to intervene in the market if needed.

The IMF and other foreign institutions have supported Ukraine's economy since Russia annexed Crimea in 2014, conditional on Kiev's pro-Western leadership implementing reforms and tackling corruption.

IMF loan disbursements have effectively been frozen since April 2017 as reforms slowed down. (Writing by Matthias Williams; editing by Jon Boyle)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)