Ukraine's central bank rejected MPC advice for sharper rate hike at Jan meet

The monetary committee included six members of the central bank's board and four directors of different departments.

Ukraine's central bank board opted to raise its key rate by 1 percentage point to 10% at its Jan. 20 meeting even though a majority of its advisory Monetary Policy Committee (MPC) initially suggested a sharper hike, according to minutes published on Monday.

Seven out of 10 members of the MPC thought the rate should to be raised to 11% from 9%, while one member suggested a hike to 12% to handle worsening market expectations amid the surge of negative news about a possible military offensive by Russia. The board of the National Bank of Ukraine (NBU) decided to move at a more moderate pace in order to prevent markets misunderstanding, it said in a statement.

"An unexpectedly harsh response by the NBU could be misunderstood by market participants and that it may cause them to react in an undesirable way", it said. "The NBU Board also took into account the dynamic change in the value of Ukrainian assets and signs of FX market stabilization," it added.

In the announcement on Jan. 20 of its decision to raise the rate to 10%, the bank said it could hike further to 11% at its next policy meeting in March and signalled that monetary conditions would remain moderately tight. The monetary committee included six members of the central bank's board and four directors of different departments.