The Board of the International Monetary Fund yesterday approved a $16 billion loan facility for Ukraine, with $4.5 billion being drawn immediately. Perhaps the main news, at least for anyone not paying close attention to the details of the package as it evolved, is that any attempt at an exchange rate peg for Ukraine is dead. The IMF announcement makes repeated references to a “flexible exchange rate regime” and in particular —
Base money will be the near-term anchor for monetary policy until an inflation targeting regime can be implemented.
In other words, targets will be set for the growth of a narrow definition of the money supply and that will be the only explicit basis for interest rate adjustments. Among other things, the Fund doesn’t want the central bank to be blowing reserves on a futile defence of a particular level of the exchange rate.  And money targets are back in style. It’s the 1970s all over again.