andriy pyshnyy : national bank of ukraine press briefing - monetary policy decisions speech by mr andriy pyshnyy, governor of the national bank of ukraine, at a press briefing on monetary policy decisions, kyiv, 26 january 2023. * * * dear colleagues, the board of the national bank of ukraine has decided to keep the key policy rate unchanged at 25 % per annum and to continue raising required reserve ratios for banks. this will facilitate a further increase in the attractiveness of hryvnia assets, support exchange rate stability, and gradually slow inflation. inflation has stabilized in the past months but is still high as of the end of 2022, consumer prices grew by 26. 6 %. at the same time, in the past three months, inflation remained almost unchanged in annual terms. the de - occupation of territories, an increase in supply of food products, and consumer demand being dampened by the energy sector destructions helped stabilize the inflationary pressure. inflation was also restrained by unchanged utility tariffs, the fixed exchange rate of the hryvnia, and improved logistics. the nbu's measures, in particular to introduce deposit instruments to hedge the fx risk, as well as limited volumes of monetary financing of the budget, contributed to a more stable fx market at the end of 2022. at the same time, the price pressure remained strong due to consequences of the invasion, such as the destruction of enterprises and infrastructure and disruption of production and supply chains. moreover, business costs continued to grow on the back of the energy sector destructions. despite a stabilization, inflation expectations remained high. inflation will decline gradually and will remain under control thanks to measures taken by the nbu and the government and the support provided by international partners the nbu forecasts inflation will slow to 18. 7 % in 2023, supported by monetary conditions remaining tight, global inflation declining, and consumer demand being dampened by power outages. inflows of announced international assistance and joint efforts of the nbu and the government to revive the domestic debt market will help avoid monetary financing of the budget deficit and balance the fx market. in the next years, inflation will decelerate more rapidly thanks to subsiding security risks, proper recovery of logistics, and larger harvests. 1 / 3 bis - central bankers'speeches the economic recovery ceased due to military attacks against energy infrastructure. as security risks subside, ukraine will return to steady economic growth in 2024

er ) at a weaker level ( devaluation of 25 % ), recalibrate capital controls and hike the key policy rate from 10 % to 25 %. 1 / 4 bis - central bankers'speeches our life became easier as international aid grew and the imf approved new programs with ukraine : first, program monitoring with board involvement, in end - 2022, and then full - fledged program ( eff ) in march 2023. this support allowed us to fully focus on ensuring macroeconomic stability – and i will now walk you through the outcomes we were able to achieve. in fact, today we are considering path to normalization of our policies – something difficult to imagine a year ago, in the summer of 2022. let's start with fx market as since february 2022 exchange rate has been our main nominal anchor. meanwhile, in summer of 2022, we saw that the initial peg supported by tight fx restrictions diverted from the fundamentals : reserves approached the dangerous level multicurrency practice was entrenched and led to additional demand via permitted channels. thus, we repegged the exchange rate by 25 % while further tightening the capital controls. this gave us space on the fx market but spread widened again after a while. as fx mismatches shrank ( partially due to the grain deal ), international support accelerated and the reserves position improved, we refocused the goals of our fx regulation towards minimizing the spread between exchange rate on cash and interbank segments of fx market. so, we expanded the options for population to satisfy its demand for fx while in addition strengthened our financial monitoring and made additional effort to improve the attractiveness of assets in national currency. as a result, er expectations stabilized and the spread between exchange rates has almost disappeared. in our policy mix, the key policy rate became a secondary policy tool. the hike from 10 % to 25 % in june a year ago was done primarily to stabilize the fx market and ensure attractiveness of assets in national currency. as in many other, even advanced, economies, we have faced weak transmission amid vast banking sector liquidity. in our case, the excessive banking reserves were the outcome of central bank purchases of bonds and fx from the government. in order to strengthen the transmission, we employed both conventional and unorthodox tools : reserve requirements were revived as monetary instrument. the ratios were increased in several steps by 10 – 20 pp depending on currency and term helping to freeze some part of liquidity