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RESOLUTION OF BOARD OF THE NATIONAL BANK OF UKRAINE

of August 18, 2015 No. 541

About the basic principles of monetary policy for 2016-2020

For the purpose of ensuring accomplishment of the functions and tasks assigned to the National Bank of Ukraine according to the legislation of Ukraine according to Articles 9, "About the National Bank of Ukraine" the Board of the National Bank of Ukraine decides 15 and 24 Laws of Ukraine:

1. Approve Offers on development of the Basic principles of monetary policy for 2016 - 2020 (further - Offers) which are applied.

2. Suggest Council of the National Bank of Ukraine to make changes to the Procedure for development of the Basic principles of monetary policy and control of its carrying out approved by Council of the National Bank of Ukraine of April 23, 2015 No. 11 (further - the Procedure for development), for the purpose of accounting of content and sentence structure.

3. To department of monetary policy and economic analysis (): provide to Nikolaychuk S.A. submission of offers for consideration of Council of the National Bank of Ukraine: prepare offers on changes which will be made to the Procedure for development, regarding structure and content of the Basic principles of monetary policy for representation for consideration of Council of the National Bank of Ukraine.

4. To impose control over the implementation of this resolution on the vice-chairman of the National Bank of Ukraine Sologub D. R.

Chairman

V. A. Hontareva

 

Approved by the Resolution of Board of the National Bank of Ukraine of August 18, 2015 No. 541

Offers on development of the Basic principles of monetary policy for 2016 - 2020

Council of the National Bank of Ukraine the decision from [...] September, 2015 approved the Basic principles of monetary policy for 2016 - 2020 determining strategy on achievement of main objective - price stability and other purposes of the National Bank of Ukraine (further - National Bank) according to the Law of Ukraine "About the National Bank of Ukraine".

Considering that low and stable inflation is one of the main deposits to sustained economic growth which can be provided with Central Bank, the National Bank considers that inflation targeting (further - IT) is the optimum monetary mode for creation of the circle of low and stable inflation.

It is supposed that transition to the IT mode it will be officially declared until the end of 2016 and till that time all necessary steps for introduction of its important elements will be performed. During transition period the National Bank will remain to right intentions on decrease in the rate of inflation according to the obligations undertaken within the program of cooperation with the IMF (EFF).

Strategy of monetary policy: main thing

The National Bank will reach price stability by observance of the quantitative purposes on inflation. Such purposes will be established by Council of National Bank based on offers of Board of National Bank and to aim at gradual decrease of the inflation rate in Ukraine to the levels compatible to price stability. After their announcement the purposes cannot be changed.

Also according to the Law of Ukraine "About the National Bank of Ukraine" the National Bank will promote financial stability and respect for steady rates of economic growth and to support economic policy of the government of Ukraine provided that it will not interfere with goal achievement on inflation.

The medium-term purpose on inflation is established at the level of 5% (for annual increment of consumer price index) and will be reached gradually. In particular the following short-term target indicators for annual change of consumer price index are determined:

December, 2016 - 12% +/-3 pct;

December, 2017 - 8% +/-2 pct;

December, 2018 - 6% +/-2 pct;

December, 2019 and further - 5% +/-1 pct.

At the same time the monetary policy of National Bank will be also directed also to accomplishment of such purposes as building-up and further - maintenance of sufficient level of the international reserves and control of growth of cash aggregates according to the program of cooperation with the IMF.

The National Bank will achieve the objectives on inflation, first of all, by change of key interest rate of the monetary policy (synchronized with discount rate) - interest rate for transactions of National Bank, having the greatest influence on condition of the monetary market. Instruments of monetary policy will play supporting role; they will promote smoothing of transfer of effects of change of key interest rate of policy in economy, and also to the balanced development of the financial markets. Besides, the National Bank will take all necessary measures for observance of the mode of the floating exchange rate.

The board of National Bank will make decisions on change of level of key interest rate of monetary policy (further - key interest rate) in in advance announced dates based on the analysis of the economic and inflation development which is carried out by National Bank 1. Results and content of discussions on questions of monetary policy will be promulgated, the corresponding explanations will be provided to the public. 

- (1) emergency meetings of Board of National Bank will be held In case of need.

The National Bank regularly informs society on the course of accomplishment of the purposes and events which will be held in the future for their achievement. The quarterly inflation report, press releases, conferences and other communication actions will accompany board meetings of National Bank on monetary questions.

For strengthening of capability of National Bank regarding goal achievement on inflation the operational principles of carrying out monetary and currency transactions and decision making concerning monetary policy will be enhanced. These new mechanisms will be entered into several stages within the next years.

1. The basic principles of monetary policy for 2016-2020

1. Unconditional priority of achievement and maintenance of price stability in comparison with other purposes and tasks of monetary policy.

2. Mode of the floating exchange rate. The exchange rate will be determined substantially by market conditions without use of desirable or forecast value. At the same time in case of need the National Bank will perform interventions in the foreign exchange market for the purpose of replenishment of the international reserves or for prevention of excessive exchange rate fluctuations.

3. Perspective nature of decision making, based on macroeconomic basis. Decisions in parameters of monetary policy are based on the complex macroeconomic analysis and the forecast.

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