Weekend Economists Pull the Easter Rabbit Out of the Hat April 18-20, 2014

[MattSh]

21. Ukraine Hikes Discount Rate from 6.5% to 9.5%, Overnight Rate to 14.5% to Halt Crash of Hryvnia

The Ukrainian Hryvnia has plunged six consecutive weeks to new record lows.

Since the beginning of the year, the Hryvnia has fallen from 8.26 to the US dollar, to 13.16 to the US dollar, a decline of 37.2%

On Monday, the Ukraine central bank pulled out the bazooka with a massive set of rate hikes.

http://globaleconomicanalysis.blogspot.com/2014/04/ukraine-hikes-rate-from-65-to-95.html

A brief explanation of what this means. So far this year, the Ukrainian Hryvnia (UAH) has gone from an exchange rate of around 8 - $1 to 13 - $1, now settling around 11.25 - $1. This makes it the worst performing currency of 2014 at the 13 - $1 rate at least. This so far has had minimal impacts on domestically sourced goods, since they are not settled internationally via dollars. But anything imported at the 13 - 1 rate means a price increase of 62% in just a couple of months. The main impact on domestic goods, of course, is the price of energy, which is mostly imported, so the price of everything will be impacted sooner or later.

Also keep in mind that these price increases are before any austerity measures kick in.