NBU Hiked Rate to 30 Percent, In Fruitless Attempt to Avert Hyperinflation and Currency Plunge

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The National Bank of the Ukraine (NBU) raised its benchmark interest rate to 30 percent from 19.5 percent, the biggest increase in 15 years. It reflects its attempt to save a collapsing economy from hyperinflation that some estimate at 272 percent. On Tuesday, the NBU said that the new refinancing rate would start on Wednesday. This is the second rate increase this year, as the bank raised it in February to 19.5 percent from 14 percent. NBU chief V А Gontareva said in a media briefing that they took the decision because they saw the “threat of inflation had risen strongly due to negative consequences from currency market panic”. The bank also kept in place the requirement for companies to sell about 75 percent of their forex earnings, which they hope would stabilise the grivnya. Gontareva hopes that it’d will return it to a level of 20-22 to the US dollar “quickly”. The grivnya lost about 70 percent of its value since the start of the Maidan unrest a year ago. On Tuesday, it traded at 26 grivnya/USD {it’s bouncing between 24 to 27/USD today… it appears that the USA is propping it up. If so, for how long?: editor}; a year ago, a greenback bought 8 grivnya. This pushes up inflation, with official numbers showing prices rising by 28.5 percent in annual terms. However, separate research by Johns Hopkins professor Steve Hanke suggests that the real inflation rate is 272 percent, the world’s highest, well above Venezuela’s 127 percent rate.

3 March 2015

RT

http://rt.com/business/237229-ukraine-rate-inflation-hryvnia/

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