Bìznes Inform (Jul 2017)
Preconditions for Introduction and Prospects for Implementation of the Inflation Targeting Regime in Ukraine
Abstract
The article is aimed at studying the preconditions for introduction, the main problems and prospects for implementation of the inflation targeting regime in Ukraine. In 2014, the country got into a crisis that affected at once the currency market, the banking system and the real sector, resulting in devaluations, bank failures, decreasing GDP, growing prices. One of the responses to the financial challenges was the transition to inflationary targeting, which led to a slowdown in inflation in 2016-2017. Goals of an inflation targeting are both price growth and international reserves. Achieving these goals implies a policy of «expensive money», exclusive smoothing by interventions of excessive fluctuations, lack of fiscal dominance, prudent fiscal policies, and elimination of quasi-fiscal imbalances. The risks of current monetary policy are the slow implementation of reforms, which can stop external lending, «pre-election» increases in social spending, debt burden growth, and the escalation of hostilities in the east of the country. Further actions by the State should include: minimization of monetary emissions, further reduction of the interest rate, providing the positive level of rates by the National Bank of Ukraine in terms of inflation, increased use of compulsory reservation of the funds involved, restriction of sales of domestic bonds and the NBU certificates to banks.
