yakiv smolii : national bank of ukraine press briefing - monetary policy statement speech by mr yakiv smolii, governor of the national bank of ukraine, at a press briefing on monetary policy, kyiv, 12 december 2019. * * * dear colleagues, please be informed that the board of the national bank of ukraine has decided to cut the key policy rate to 13. 5 % per annum effective 13 december 2019. the nbu speeds up the monetary policy easing, as the rapid appreciation of the hryvnia makes inflationary pressures decline faster than expected. what inflation developments followed the last monetary policy meeting? in november, consumer inflation slowed to 5. 1 % yoy, exceeding our expectations. in such a way, the nbu attained the medium - term target of 5 %, which was set in 2015. the steady disinflation has been driven by a gradual easing of underlying pressures on prices, reflected in a slowdown of core inflation, and by lower energy prices. inflation slowed markedly due to both the strengthening of the hryvnia and an improvement in inflation expectations. the above factors neutralized the pressure on prices from robust consumer demand and worse harvest of some vegetables. i would like to emphasize the reasons for the hryvnia appreciation, which has given rise to much speculation. in october – november, the excess supply of foreign currency was mainly driven by proceeds from ukrainian exports, in particular thanks to a record harvest of grain and oil crops, and selling foreign currency coming from borrowings of state - owned companies. in particular, agriculture and metals industry provided 70 % of foreign currency supply on the interbank market in november. contrary to the common belief, the continued foreign investment in hryvnia government bonds did not have a major impact on the foreign exchange market, unlike in the past months. at the same time, the nbu actively purchased excess foreign currency to increase international reserves. net foreign exchange interventions have totaled more than usd 5. 5 billion since the start of 2019. ( corrected ) besides, our purchases of foreign currency much exceed the inflows from nonresidents. the nonresident portfolio grew by around usd 4 billion this year. thus, net purchases exceeded this amount by more than one and a half billion dollars. this indicates that these are not only nonresidents who create the excess supply of foreign currency. what are the future inflation developments? the stronger hryvnia made inflation decline towards the 5

##ence, let us not forget that climate action begins with each of us. for the bank, this has meant making changes to our own internal operations to reduce our carbon footprint. for several years now, we have been watering our grounds using rainwater harvested by our roofing systems. we have also actively reduced our 4 / 5 bis central bankers'speeches carbon footprint in our currency management operations. we print fewer brand new notes and use durable polymer banknotes to prolong their lifespan in circulation. we also employ coprocessing, where shredded old notes are converted into productive energy – this has saved 440 tons of co2 emissions since 2016. the bank has also embarked on a digitalisation strategy that will significantly reduce internal usage of paper. we have also progressively moved to incorporate wider sustainability considerations in our investment decisions. within the financial sector, the leadership shown by the islamic finance industry in adopting value - based intermediation is a positive step towards sharpening the focus of finance on creating a positive impact to the economy, people and the environment. several financial institutions are also allocating more capital towards innovation that promotes sustainability – such as in renewable energy sources, and sustainable agro - production and manufacturing. others are providing incentives to encourage “ greener ” consumption that is less damaging to the environment. this includes preferential rates for hybrid vehicles and financing projects with a green building index certification which serve to encourage manufacturers and developers to build more sustainable solutions. climate change will have irreversible consequences for us all. the effects to the planet, and global efforts to transition towards greater sustainability, will certainly have implications for the economy and for financial stability which cannot be ignored. our window of opportunity to act is narrowing very quickly. in the period ahead, it is crucial that the financial industry faces these changes in a deliberate, informed manner. we must respond strategically, and pre - emptively ; and we must act now. we can no longer afford to just react once the worst has already happened. the stakes are simply too high. on our part, the bank is committed to ensuring that the financial system remains resilient in the face of these risks. to this end, i have set out a broad outline for achieving climate resilience. the task ahead will call for strong leadership in working with authorities, businesses and households to address what may be one of the greatest threats to our generation. discussions at this conference aim to help us meet this challenge with greater confidence and conviction on what must be done –