The majority – seven out of 11 members of the Monetary Policy Committee (MPC) of the National Bank of Ukraine (NBU) at the meeting on December 12 supported an increase in the key interest rate to 13.5% per annum starting December 13, while two of their colleagues advocated for maintaining it at 13%, and another two pushed for an increase to 14%, as stated in the results of the MPC discussion released on Monday.
"They characterized this move as a balanced decision given the current conditions, taking into account the temporary nature of the main factors driving the current inflation acceleration and the stability of inflation expectations. In their opinion, raising the key interest rate by 0.5 percentage points (pp) at the December meeting, along with measures to support the stability of the currency market, would be sufficient to demonstrate the NBU's readiness to curb price pressures, which would calm the expectations of economic agents," - the position of the majority is outlined in the press release.
At the same time, two MPC members who advocated for keeping the rate at 13% per annum deemed an increase inappropriate, considering the likely short-term nature of the price surge, the time lag of monetary transmission, and the stability of inflation expectations.
Colleagues who believed a bolder increase in the key interest rate to 14% per annum in December was necessary argued that the central bank must act promptly and decisively in light of the rapid rise in inflation, which they felt is increasingly showing signs of persistence, posing a threat of an "inflation spiral."
"These MPC members emphasized that the discussion about the 'non-monetary' nature of inflation drivers is purely theoretical, but in practice, it can even be harmful, as it risks delaying an appropriate response," - the release stated.