Ukraine in IMF memo declares support for NBU independence, inflation targeting policy
The authorities of Ukraine will avoid any actions implying political interference in the independence of the National Bank of Ukraine (NBU), which will continue to adhere to the inflation targeting policy under the exchange rate regime with an emphasis on maintaining financial stability, according to the memorandum to the International Monetary Fund (IMF).
"The NBU will continue its flexible inflation targeting (IT) policy, within a floating exchange rate regime, and with a strong focus on maintaining financial stability. A credible flexible IT regime will better anchor inflation expectation, allowing the NBU to better smooth economic cycles and mitigate liquidity stress. We will ensure that this framework remains unchanged including irrevocable inflation targets and principles of monetary policy," the document says.
"Our monetary and exchange rate policies and operations will remain consistent with our commitment to meet the program's international reserve and inflation objectives, as well as ensuring sufficient liquidity. We intend to contain inflation within the NBU's target range of 5% +/-1 percentage point, while letting the exchange rate adjust in line with economic fundamentals and purchasing foreign exchange to meet the program's reserve targets," it says.
"Consultation with the IMF Executive Board will be triggered if the observed headline inflation falls outside an outer band of +/- 3 percentage points around the mid-point targets for 2020 and 2021. If the observed headline inflation falls outside an inner band range of +/- 1 percentage points around the mid-point targets for 2020 and 2021, then the authorities will complete a consultation with IMF staff on the reasons for the deviation and the proposed policy response," according to the report.