Court decisions regarding PrivatBank threatening cycle of monetary policy mitigation started by NBU
The monetary policy committee of the National Bank of Ukraine (NBU) has said that new significant risks appear. Recent lawsuits and court rulings that call into question the measures to ensure the stability, transparency, and efficiency of the banking system create threats to the overall financial stability, according to a summary of the key policy rate discussion by the NBU monetary policy committee posted on the NBU's website on Monday.
"In addition, political uncertainty continues to put the NBU's independence at risk. The central bank's independence is at the core of increasing the confidence of businesses and the public in the NBU's monetary policy and banking supervision decisions," the committee said.
"Should they materialize, the risks noted above would have large-scale implications, as they threaten to cut off support from international partners and make it harder for Ukraine to access financial resources to make public debt repayments set to peak this year," the committee said.
Materialization of these risks is treated as force majeure and, as such, is not part of the baseline macroeconomic scenario that provides for a gradual monetary policy easing, eight of the committee members argued.
"But if the probability of these risks increases, the NBU will have to respond accordingly, including through monetary instruments," the committee said.
By contrast, one MPC member said that the key policy rate should be kept at its current level (18.0%). It is premature to launch the monetary policy easing amid risks to financial stability, the committee member argued.