The NBU called risks for inflation

В НБУ назвали риски для роста инфляции

NBU intends to continue to raise interest rates

In November, the national Bank may raise the discount rate to 18.5% due to high wage growth.

The rate of growth of real wages outpaced the growth in labor productivity, which leads to the preservation of fundamental pressure on inflation. This is stated in the discussions of the members of the monetary policy Committee regarding the level of interest rates.

As you know, last month the NBU kept the discount rate at 18%. Five of the ten members of the Committee shared the opinion about the feasibility of raising the discount rate by 50 b.p. to 18.5%.

Arguing, they said that the tight monetary policy necessary to eliminate the influence on the dynamics of inflation in the medium term, factors such as the deterioration in inflation expectations, the expansion of consumer demand, high wage growth, less favorable global financial conditions and the pricing environment .

Individual members of the Commission focused on the fact that the rate of growth of real wages in recent times outpaced the growth of labor productivity.

The increase in incomes due to higher salaries, pension payments, and remittances from abroad stimulates the recovery of private consumption, which will lead to the preservation of fundamental pressure on inflation.

To eliminate the influence of this factor on price is necessary to give additional impetus to a reorientation of consumption on savings.

Also members of the Commission, as in previous meetings, talked about the current challenging financial conditions for developing countries, and the increase in world energy prices and the risks of further deterioration in the external environment.

In particular, the focus was on the risks of rapid cooling of the global economy, including the economies of countries – major trade partners of Ukraine, the fall in world commodity prices of Ukrainian exports, the possibility of a further rise in prices of energy on world markets, the risks of a continued outflow of capital from developing countries, in particular Ukraine, in the result of a rapid transition of the Central banks of the leading countries to a more tight monetary policy.

Note, with the beginning of autumn, the price growth in Ukraine has accelerated sharply. Consumer prices in September compared to August, grew by 1.9%. According to state statistics, since the beginning of the year, prices in Ukraine increased by 5.6%. In annual terms inflation fell to 8.9%.

 

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