NBU approves flexible inflation targeting regime
Kyiv • UNN
The NBU will apply a flexible inflation targeting regime to maintain price stability. The goal is to bring inflation to the 5% target within three years, with a flexible policy horizon.
The National Bank of Ukraine will apply a flexible inflation targeting regime to maintain price stability. The goal is to bring inflation to the 5% target within three years, with a flexible definition of the policy horizon, the regulator reported on the Basic Principles of Monetary Policy for the Medium Term adopted by the NBU Council on September 11, UNN writes.
The NBU will apply a flexible inflation targeting regime to maintain price stability
Details
As noted, the NBU has already de facto switched to such a regime in the first half of 2024, in particular, it announced its intention to maintain moderate inflation in 2024 and return it to the 5% target in the coming years. "This was preceded by a successful transition to managed exchange rate flexibility and a stronger role for the key policy rate due to a reduction in economic uncertainty, modernization of the operational design of interest rate policy, and other measures taken by the NBU," the statement said.
"From now on, the Guidelines officially stipulate that the NBU's monetary policy is aimed at bringing inflation to the 5% target over an appropriate policy horizon not exceeding three years. Such a policy horizon, i.e. the period of time during which the NBU intends to return inflation to the target, will be determined flexibly," the NBU said.
The format will reportedly "distinguish the current regime from the full-fledged inflation targeting that was in place before the full-scale invasion, when the horizon for returning inflation to the target was 9-18 months.
"The NBU intends to use flexible inflation targeting until the economy normalizes and the full-fledged format of inflation targeting with a floating exchange rate is restored," the regulator said.
