for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

POLL-Ukraine likely to keep key interest rate at 6% to help economy

* Interest rate poll data reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=UACBIR%3DECI

KYIV, Jan 19 (Reuters) - Ukraine’s central bank is likely to keep its key interest rate at a historically low 6% this week to continue supporting a virus-hit economy despite rising inflation, a Reuters poll showed on Tuesday.

Some 14 of 16 analysts forecast the rate would remain unchanged at the first 2021 monetary policy meeting on Thursday.

The other two think that the bank will raise the rate to 7% as inflation may exceed its target of 5% soon.

Oleksiy Blinov from Alfa-Bank Ukraine expects inflation to overshoot the target in January after it jumped to 5% in December from 3.8% in November, fuelled by rising global prices of steel, gas and other commodities, and some domestic factors.

“The logic behind inflation targeting tells us that we should see a prime rate hike of at least 100 bps (to 7%),” Blinov said.

However, analysts from the ICU brokerage see no rate change until the second half of the year.

“We believe that such hikes are unlikely until the NBU (the National Bank of Ukraine) sees strong evidence of robust recovery of economic activity and underlying inflation pressure,” they said in written comments.

They added that a stable national currency rate and low consumer demand amid the coronavirus lockdown will curb the pace of inflation.

The government has also capped household gas prices until the end of March to prevent a further hike in utility bills. .

The NBU gradually brought the rate down to 6% in June 2020 from 18% in April 2019. When it kept the rate unchanged in December the central bank said it would be “ready to raise its key policy rate in response to accelerating inflation”.

Ukraine’s economy ministry said the economy may shrink 3% in the first quarter of 2021 because of tight lockdown restrictions that took effect this month to prevent a spike in coronavirus infections.

In 2020, the economy declined by 4.8%, according to the ministry’s estimate. (Editing by Matthias Williams, Larry King)

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up