Ukraine expected to keep rates unchanged eyeing upcoming elections

Ukraine's central bank is expected to leave its key interest rate unchanged next week to safeguard financial stability before an unpredictable presidential election, a monthly Reuters poll showed on Wednesday. Eleven out of 17 analysts polled expect the rate to remain 18.0 per cent, even though they see annual inflation slowing to 9.0 per cent in February from 9.2 per cent in January and expect the downward trend to continue. Five analysts think the rate will be cut to 17.5 per cent. One predicted a cut to 17.0 per cent.

The central bank will announce its decision on March 14, two weeks before Ukrainians vote for a new president, on March 31. The central bank said in January it saw room to loosen monetary policy this year as long as inflationary risks diminish and the government keeps its $3.9 billion aid-for-reforms deal with the International Monetary Fund on track.

The IMF programme, approved in December, aims to keep the economy stable while the country holds presidential elections in March and parliamentary elections in October. Incumbent President Petro Poroshenko supports cooperation with the IMF, but he trails in the polls. The frontrunner is comic actor Volodymyr Zelenskiy, a political novice and an unknown quantity to investors.

Opposition leader Yulia Tymoshenko, who is tied with Poroshenko according to the latest opinion poll, wants to change the terms of the IMF programme and change central bank policy to provide cheaper loans to businesses. If no candidate wins 50 per cent of the vote, as polls predict, the top two candidates will face each other in a run-off on April 21.

Ukraine has not lowered its key rate since May 2017, aiming to rein in inflation, which reached 16 per cent in the middle of that year. The central bank targets inflation of 6.3 per cent by the end of 2019, down from 9.8 per cent in 2018.

(With inputs from agencies.)