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Ukraine central bank cuts key policy rate to 15.5%

The National Bank of Ukraine, or NBU, lowered its key policy rate for the fourth time in 2019 to 15.5% from 16.5%, saying inflation is nearing the central bank's target.

After declining to an annual rate of 7.5% in September, consumer inflation continued to slow down in October, according to the central bank's preliminary estimates.

"The NBU continues the cycle of monetary policy easing as inflation is steadily declining towards the target of 5%," central bank Governor Yakiv Smolii said in a press briefing.

The central bank said inflation is still projected to decline to 6.3% in 2019 and reach the target at the end of 2020.

If inflation steadily declines to the target, the key policy rate could be lowered to 8% by the end of 2021, according to the central bank.

"The largest decrease in the key policy rate is expected to take place in 2020, along with inflation returning to its target range and inflation expectations improving," the NBU said.

The NBU said it expects the Ukrainian economy to expand 3.5% in 2019 and 2020 and by 4% in 2020, up from previous forecasts.

The central bank warned that slower global growth and "worsened" terms of trade would weigh on domestic growth next year.

Key risks to the growth forecasts, exchange rate and the expected decline in inflation include a potential delay of a new cooperation agreement between Ukraine and the International Monetary Fund, and local court proceedings that threaten financial stability, the central bank said.