Russia Raises Key Interest Rate by 10.5%P... Will Ukraine Also Significantly Hike Its Base Rate?

First Monetary Policy Meeting After Russia's Invasion on the 3rd

Ukraine Base Interest Rate Trend [Image Source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] Ukraine, which is in armed confrontation with Russia, is expected to significantly raise its benchmark interest rate as of the 3rd (local time).

According to Bloomberg News, the National Bank of Ukraine will hold its first monetary policy meeting since Russia's invasion on this day. Due to growing concerns about the Ukrainian economy amid the armed conflict and the risk of capital outflows caused by the depreciation of the currency, an increase in the benchmark interest rate is anticipated.

The hryvnia was trading at around 26 hryvnias per dollar in early December last year, but recently it has been trading at around 29 hryvnias per dollar.

Earlier, the Russian Central Bank also held its first monetary policy meeting since the invasion of Ukraine on the 28th of last month and sharply raised the benchmark interest rate from 9.5% to 20%.

When Russia annexed the Crimean (Krym) Peninsula in 2014, Ukraine raised its benchmark interest rate up to 30%.

Ukraine has steadily raised its benchmark interest rate since March last year. The benchmark interest rate, which was 6% at the beginning of last year, has now risen to 10%.

Mykhailo Demkiv, an analyst at the Ukrainian investment company ICU, said, "The situation is very complicated, so it is difficult to predict whether the benchmark interest rate will be raised to 14-15% or what the central bank's decision will be."

The National Bank of Ukraine has taken capital control measures such as limiting cash withdrawals and suspending foreign exchange transactions since the Russian invasion.

Hungary, which shares a border with Ukraine, will also hold a central bank monetary policy meeting on the same day. The Hungarian forint has fallen more than 5% since Russia's invasion of Ukraine. Hungary has been raising its benchmark interest rate since June last year. The benchmark interest rate, which was 0.6% at the beginning of last year, has now risen to 3.4%.

Meanwhile, Canada raised its benchmark interest rate for the first time since the COVID-19 pandemic on the 2nd. The Bank of Canada raised the benchmark interest rate from 0.25% to 0.5% at its monetary policy meeting on this day. This is Canada's first interest rate hike since October 2018.

Earlier, an interest rate hike was expected in Canada in January. However, at that time, the Bank of Canada kept the benchmark interest rate unchanged, citing the spread of Omicron.

This content was produced with the assistance of AI translation services.