The NBU council has criticized the NBU board for failing to contain inflation this year, the NBU said in a press release issued last night. The council said at its meeting on Oct 31 that the board did not use main policy instruments to the full extent in order to meet the 6%-10% inflation target this year. The council said the board ignored its warnings early in Q3 and abstained from hiking its main policy rate, doing this only at end-October. The council also noted that the banking system’s liquidity is excessive. This, coupled with a big surplus on the single treasury account, may destabilize the national currency towards the end of the year, when the government will spend more money, the council warned.
The board hiked the NBU benchmark discount rate to 13.50% from 12.50% from Oct 27, while revising its inflation forecast for end-2017 to 12.2% from 9.1%. In September, headline inflation accelerated to 16.4%, which was higher than forecast by the NBU in July. The NBU explained this with accelerated food price growth, growing production costs on the back of wage growth, and growing consumer demand.