Ukraine central bank more than doubles key rate

• Ukraine’s central bank more than doubled its main interest rate on Thursday.
• Extraordinary action aimed at bolstering the country’s economy.
• Russia’s invasion drove inflation to 16.4% in April, predicted to hit 20%.

Ukraine’s central bank more than doubled its main interest rate on Thursday, in an extraordinary action aimed at bolstering the country’s economy, which has been battered by the Russian invasion.

The National Bank of Ukraine (NBU) increased the interest rate from 10% to 25% per year, the highest since 2015.

It sought to “restrain inflation processes during the war”, the board of the National Bank of Ukraine said in a statement.

“This resolute step aims to protect households’ income and savings in (Ukraine’s currency) the hryvnia, raise the attractiveness of hryvnia assets, reduce the pressure on the foreign exchange market,” it said.

It went on to say that the interventionist measure will “improve” its ability to stabilize the currency.

Read More: EU official: $24bn of Russian central bank assets frozen in bloc

According to official numbers released by the bank, Russia’s invasion drove inflation to 16.4 percent year on year in April.

It is predicted that inflation would hit 20% by the end of the year.

The hike will also help limit the “threat” of the “dollarisation” of the Ukrainian economy — abandoning the hryvnia in favor of the US dollar as the last resort, it said.

The hryvnia was trading at around 29.5 to the dollar as of Thursday afternoon, relatively stable since Moscow launched its offensive on February 24.

Kirill Shevchenko, the president of Ukraine’s central bank, declared Thursday that he intended to restart negotiations with the International Monetary Fund (IMF) on “a new economic blueprint” for the country.

The Russian invasion has had a significant impact on the Ukrainian economy, not only disrupting production and exports but also boosting inflation and placing strain on the central bank’s reserves.

Read More: Central bank of Ukraine raises interest rates to 25%