October 19, 2019 / 11:30 PM / 24 days ago

CORRECTED, OFFICIAL-Ukraine central bank will gradually cut key rate to 8%

(Corrects rate cuts since beginning of 2019 to 1.5 percentage points)

By Heather Timmons

WASHINGTON, Oct 19 (Reuters) - Ukraine’s economy is being buffeted by the trade conflict between China and the U.S, low interest rates in developed countries, and relatively low energy costs.

The bank still plans to cut its key interest rate in coming years by more than half, to 8%, Deputy Central Bank Governor Kateryna Rozhkova said during an interview at the International Monetary Fund annual meeting, reiterating earlier guidance.

The question, though, is how long that will take, Rozhkova said. The bank is committed to reducing its key rate from 16.5% to 9% through 2020, she said. But, “how quickly the key policy rate will get to the 8% level is another issue. It will depend on both internal and external risks.”

Since April, the bank has cut the key interest rate by 1.5 percentage points to 16.5%. “We intend to cut the key policy rate gradually, as there seems to be no need to keep it at the current high level to decrease inflation to its 5% target level.”

The U.S.-China trade war is effecting Ukraine’s economy, as it is economies around the globe, she said. “Global demand slowed down in September due to negative expectations,” Rozhkova said, with Ukrainian exporters facing worsened conditions in global commodity markets.

On the other hand, imported energy prices are at a “relatively low level,” she said. And Ukraine’s high interest rates have been a magnet for foreign investors searching for higher yields.

“The softer monetary policy of central banks of developed countries promotes investor interest in Ukrainian assets,” she said. (Reporting by Heather Timmons Editing by Alistair Bell)

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