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© Reuters. File photo: March 3, 2016, the headquarters of the Central Bank of Ukraine was located in the center of Kiev, Ukraine. REUTERS/Valentyn Ogirenko

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Natalia Zinetz

Kiev (Reuters)-A Reuters survey on Tuesday showed that the Central Bank of Ukraine may leave the key interest rate unchanged at 7.5% this week, as inflation is expected to slow in the coming months.

Ten of the 14 Ukrainian analysts predict that interest rates will not change at the July 22 monetary policy meeting, while the rest are expected to rise to 8.0%.

The National Bank of Ukraine (NBU) kept its main interest rate unchanged at its last monetary policy meeting in June, although the inflation rate has climbed from 6.1% in January to 9.5% in May.

Year-on-year readings in June were flat, while monthly inflation slowed to 0.2% from 1.3% in May.

“The National Bank of Ukraine is trying to maintain a loose monetary policy,” said Dmytro Boyarchuk of the think tank CASE-Ukraine. “If the NBU did not raise interest rates when the inflation rate accelerated to 9.5% y/y in May, it is unlikely to increase when the consumer price index starts to slow in June.”

Analysts from the Ukrainian subsidiary of Raiffeisen Bank said that seasonal factors and strong hryvnia made imported products cheaper and helped consumer prices stabilize in June.

“Therefore, the current inflation trend…There is no reason to raise the key interest rate at the next Monetary Policy Committee meeting,” they said in a report, adding that the inflation rate at the end of the second quarter was close to the central bank’s forecast of 9.2%.

The central bank has raised interest rates twice this year, trying to bring the inflation rate back to the target range of around 5% by 2022, and scaled down some anti-crisis measures at the June meeting.

Raiffeisen analysts said that the performance of the hryvnia and the gradual reduction of anti-crisis monetary expansion tools have created conditions for inflation to stabilize in the future and reverse its upward trend.

However, Kostyantyn Fastovets of the brokerage firm Adamant Capital expects the central bank to raise interest rates to 8.0% because he predicts that inflation will accelerate in July.

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