The National Bank of Ukraine (NBU) announced that Ukraine’s monetary base increased in August 2008 3.2% MoM (19.1% YTD), thus reaching UAH 169 bln (USD 34.8 bln), while M3 grew 1.6% MoM (19.8% YTD) and reached UAH 474.7 bln (USD 97.9 bln). Therefore, both aggregates’ growth slowed down as compared to July (6.1% and 3.8% MoM respectively).
The YoY growth rates in August were 40.2% for the monetary base (41.6% in July) and 44.3% for M3 (47.4% in July).
As announced earlier, the NBU expects that Ukraine’s monetary base in 2008 will grow 25-30%, while M3 will grow 35-40%.
The NBU also announced that liquidity in the banking sector fell insignificantly and that interest rates in both domestic and foreign currencies increased by 0.2-0.5 p.p.
Our view: We see the decreasing growth rate of monetary aggregates as one of the consequences of the government’s conservative monetary policy in attempts to curb inflation. Nevertheless, we still believe that monetary growth should be suppressed even more to meet the government’s inflation target of 15.9%.
The expectation of strict anti-inflationary policies, coupled with an expected CPI drop in August, gives us grounds to confirm our earlier inflationary forecast for 2008 of 20.5% EOP.