By Max Hunder
KYIV (Reuters) -The National Bank of Ukraine kept its key rate unchanged at 25% on Thursday, a level it said was forecast to be maintained until the second quarter of 2024 as it grapples with high inflation fuelled by Russia’s invasion.
The central bank, led by new Governor Andriy Pyshnyi, said it expected a 32% GDP contraction in 2022, a slight improvement on its earlier forecast, and that the economy was “livening up” after falling sharply when the war began eight months ago.
It said a gradual recovery was set to continue into 2023-24 and that a key assumption underpinning its forecast was that security risks in Ukraine would start to decline significantly from mid-2023.
The rate meeting was the first under Pyshnyi, who served as head of Ukraine’s state savings bank from 2014 to 2020 and was appointed head of the central bank on Oct. 7.
His predecessor, Kyrylo Shevchenko, resigned initially citing health problems, but later saying he faced political pressure after an old embezzlement case against him was reawakened immediately after his departure.
Pyshnyi said monetary policy since the Feb. 24 invasion had been “entirely appropriate” and that no extra measures were foreseen by the central bank despite Russian air strikes on Ukrainian energy facilities.
The central bank was standing by, however, and was ready to step in if necessary, he said.
Inflation will hit around 30% this year, but should decrease in the coming years as the security situation improves, though it flagged high energy costs as the biggest obstacle to any recovery.
Inflation should be under 21% next year and under 10% in 2024, it said.
The central bank said it viewed cooperation with Ukraine’s international partners as a critically important source of funds to replenish the budget.
(Reporting by Max Hunder; writing by Tom Balmforth; editing by Timothy Heritage)