January 31, 2018 / 9:56 AM / in a year

UPDATE 1-Ukraine PM calls for rate cut to speed up growth

(Adds details, background)

KIEV, Jan 31 (Reuters) - Ukrainian Prime Minister Volodymyr Groysman on Wednesday called for the central bank to cut interest rates to boost lending, days after the bank surprised the market with an aggressive rate hike to contain inflation.

Groysman said Ukraine should target annual economic growth of 5-7 percent and this year was aiming for 3 percent.

“At the moment we’re thinking that the interest rate on loans needs to be lowered, as loans need to be available for the national economy,” Groysman said at a televised cabinet meeting.

“And this is a separate topic of discussion, including with the central bank.”

The central bank last week raised the main interest rate 1.5 percentage points to 16 percent to contain stubbornly high inflation, which stood at 13.7 percent at the end of December.

A Reuters poll of analysts predicted rates to remain on hold.

Rates could be raised further if there are no signs of inflationary pressures easing in the short term, the bank had said, adding that rising food prices and household incomes remain a key risk in 2018.

It also said the government’s softer fiscal policy, including higher social spending, posed a considerable risk to inflation expectations.

Ukraine will hold parliamentary and presidential elections in 2019 at the latest, raising concerns that potentially unpopular reforms could stall and government spending increase. (Reporting by Natalia Zinets, Writing by Matthias Williams, Editing by Angus MacSwan)

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