By KYIV. Nov 10 (Interfax-Ukraine) – The main function of the National Bank of Ukraine (NBU), according to the Constitution, is to ensure the stability of the monetary unit, and with such a wording of the mandate, questions can only be about the interpretation of the concept of "monetary unit stability," it is definitely not about targeting employment levels and economic growth, NBU Governor Andriy Pyshnyy has said.
"According to the Monetary Policy Strategy, we are pursuing a flexible policy in order to find the optimal balance between, first of all, ensuring the stability of the monetary unit, and secondly, promoting economic growth. Therefore, there are no grounds for revising or expanding the mandate of the NBU," Pyshnyy told Interfax-Ukraine for a request to comment on the discussion on the possibility of revising or expanding the mandate of the National Bank.
The governor of the NBU said that there is no, and even in theory there cannot be, the practice of sustainable achievement of a quantitative inflation target simultaneously with such quantitative targets as a certain level of employment and economic growth. Therefore, in most cases, "except for the so-called divine coincidences, as economic literature describes it," one has to set target priorities.
"That is why no central bank with declared inflation targeting has a double, triple, and so on mandate. An attempt to achieve several goals at the same time can lead to a dispersion of resources and attention and, accordingly, failure to achieve any of the goals," Pyshnyy said.
According to him, the term "monetary unit stability" is specified in Article 6 of the NBU Law, where it is determined that when performing its main function, the National Bank shall proceed from the priority of achieving and maintaining price stability in the state. Article 1 provides a clear definition of the term "price stability" – maintaining the purchasing power of the national currency by maintaining in the medium term (three to five years) low, stable inflation, measured by the consumer price index, he added.
"That is why the National Bank targets, first of all, the level of inflation. However, the achievement of price and financial stability, although not sufficient, is a necessary prerequisite for economic growth and employment. In this sense, the mandate of the NBU does indirectly cover these indicators," Pyshnyy said.
He said that promoting sustainable economic growth is a direct part of the NBU’s mandate.
"This is the third priority goal of the National Bank after achieving and maintaining price and financial stability, enshrined in Article 6 of the law on the NBU," the head of the regulator said.
