the republic logo

Ukraine raises key interest rate by 5.5 percentage points after national currency slides

bug
Share/Save/Bookmark

KIEV, Ukraine — Following a massive drop in its currency that has stoked concerns of runaway inflation, Ukraine on Thursday raised a key interest rate by a whopping 5.5 percentage points.

The rate hike to 19.5 percent was a response to the 46 percent slide in the hryvnia against the U.S. dollar earlier on Thursday. A plunging currency can fan inflation by making imports more expensive.

The move appears to have eased the pressure on the currency somewhat and it was trading 18 percent lower at 18 hryvnias per dollar in early evening trading. The hryvnia has faced intense selling pressure for over a year, largely because of the ongoing fighting in eastern Ukraine where, according to President Petro Poroshenko, Kiev spends up to 7 million euros ($8 million) a day fighting Russia-backed separatists.

Also Thursday, the National Bank of Ukraine said the country's gold reserves diminished by about nine percent, to $6.42 billion, over the past month.

PHOTO: People pass by a tank in Kiev that has been used by pro-Russian separatists in the country's east and then brought to the Ukrainian capital as a symbol of the current conflict, Thursday, Feb. 5, 2015. The Ukrainian government is anxious to use Thursday's visit by U.S. Secretary of State John Kerry to Kiev to reiterate its plea for lethal aid. President Barack Obama has opposed the idea of sending weapons to Ukraine but sources in his administration say this position could change in the light of recent events.  (AP Photo/Efrem Lukatsky)
People pass by a tank in Kiev that has been used by pro-Russian separatists in the country's east and then brought to the Ukrainian capital as a symbol of the current conflict, Thursday, Feb. 5, 2015. The Ukrainian government is anxious to use Thursday's visit by U.S. Secretary of State John Kerry to Kiev to reiterate its plea for lethal aid. President Barack Obama has opposed the idea of sending weapons to Ukraine but sources in his administration say this position could change in the light of recent events. (AP Photo/Efrem Lukatsky)

Unlike the Russian ruble, another much-battered currency, the hryvnia does not float freely, creating a discrepancy between the official exchange rate, the rate on high street and on the black market. Alongside the rate hike, the central bank gave more room for the hryvnia's exchange rate such and scrapped daily foreign currency auctions.

"The National Bank is going to implement stricter monetary and credit policies in order to provide a stable and controllable development of the market situation," the bank said in a statement, saying that the bank was forced to act in the view of the galloping inflation which was higher nearly 25 percent year on year in December.

Ukraine has received $4.6 billion from the International Monetary Fund as part of a $17 billion aid package but it is seeking more funding as the ongoing conflict in the east shows no signs of ending. The country's foreign currency reserves are just $6.4 billion while its GDP is due to decline by 5 percent this year after an estimated 6.7 percent drop last year.

____

Nataliya Vasilyeva in Moscow contributed to this report.

Think your friends should see this? Share it with them!

Story copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Feedback, Corrections and Other Requests: AP welcomes feedback and comments from readers. Send an email to info@ap.org and it will be forwarded to the appropriate editor or reporter.


We also have more stories about:
(click the phrases to see a list)

Category:

Follow The Republic:

All content copyright ©2015 The Republic, a division of Home News Enterprises unless otherwise noted.
All rights reserved. Privacy policy.