Potential Russian military aggression lowers price of Ukrainian assets, increases inflation risks – NBU

Potential military aggression by Russia lowers the price of Ukrainian assets and increases inflation risks, Sergiy Nikolaychuk, the deputy head of the National Bank of Ukraine (NBU), said.

"Today's decision [on the refinancing rate] took into account a number of pro-inflationary risks and in the first place we highlighted the strengthening of geopolitical risks associated with a possible military aggression from the Russian Federation. Unfortunately, it is precisely because of this factor that we saw a decline in prices for Ukrainian assets, additional pressure on the foreign exchange market, which, of course, did not help reduce inflation," he said during a press briefing.

According to him, the regulator already sees certain signs of stabilization in the foreign exchange market and expects return to the indicators that remained before the escalation of the conflict.

He added that Ukrainian business is already accustomed to living in such conditions, so a significant delay in any investment decisions is unlikely.

According to a review by Bank of America Corp. (BofA), despite the likely decrease in geopolitical risk that weighs on the valuation of both Russian and Ukrainian assets in the near future, this risk could easily resume at any time in 2022.

Thus, the agreed "discussions on sensitive issues" have yet to be led to tangible results, which can be quite difficult to achieve given the high political sensitivity of the issue of security guarantees regarding the Ukrainian conflict and NATO expansion.

Source: www.en.interfax.com.ua