By KYIV. Dec 19 (Interfax-Ukraine) – In January, the National Bank of Ukraine (NBU) will discuss potential changes in the operational design of monetary policy and an additional increase in reserve requirements, the regulator’s press service reported on Monday following the discussion of members of the Monetary Policy committee (MPC).
"All discussion participants agreed that, taking into account the arrangements made during negotiations with the IMF, it would be sufficient to raise the RR [reserve requirements] ratios by 5 pp in December. A decision regarding another hike of RR ratios should be made in January 2023 depending on how the situation unfolds," the NBU said.
At the same time, several MPC members emphasized that is was reasonable to hike the RR ratio for current accounts by as much as 10 pp in December.
As one of them noted, in its decisions the NBU must take account of not only the current liquidity of the banking system, but also its prospective state.
The banking system’s liquidity surplus will continue to widen, in the view of the structure of budget deficit financing sources, continued expansionary fiscal policy, and large expenditures on payments to service people and social needs.
In addition, MPC members also supported other efforts to enhance monetary transmission.
They noted that, by hiking its key policy rate, the NBU had created market stimuli for the banks to raise their rates on retail and corporate term deposits in the hryvnia. However, due to some factors, including the inert interest rate policies of the banking sector’s largest market makers, such market stimuli did not result in sufficient supply of deposit products with attractive rates.
Therefore, the NBU should develop additional effective measures to boost competition for depositors, prompting the banks to raise their deposit rates more actively, which is needed to maintain the macrofinancial stability amid the war.
During the discussion, MPC members also agreed that in January they would discuss potential changes in the operational design of monetary policy after the macroeconomic forecast is updated, while also taking into account the dynamics of prices and inflation expectations, results of implemented measures, and their impact on the FX market and the domestic debt market.
All discussion participants agreed that the NBU should continue to pursue a relatively tight monetary policy for a long time in order to maintain macrofinancial stability.
