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NBU cuts discount rate again

The National Bank has cut the key policy rate from 14.5% to 13.5%.

NBU cuts discount rate again

The key policy rate has been cut to 13.5% effective 26 April 2024, the NBU press service reports

This decision of the NBU Board takes into account:

the easing of actual and expected price pressures;reducing risks to international financial support;the need to support credit development and economic recovery without additional risks to price and financial stability.

In Q1 2024, consumer inflation decelerated faster than the NBU expected. In March, it fell to 3.2% yoy. 

The NBU continues to forecast a moderate acceleration in inflation this year: up to 8.2% according to its updated and improved forecast.

In March, Ukraine received about USD 9 billion from its international partners. The second tranche of EUR 1.5 billion was received from the EU in April. In addition, we have positive news from the United States about the approval of a military and financial assistance package. Given this, Ukraine can count on USD 38bn of external budgetary aid this year. Ukraine can count on USD 38 billion of external budgetary assistance this year.

Measures to strengthen Ukraine's self-sufficiency continue to be implemented. The government is strengthening its own resource base and increasing domestic borrowing. The NBU is improving currency control measures. Together with the regularity of external assistance, this will help finance planned budget expenditures and maintain a controlled situation on the foreign exchange market.

Despite the expected gradual decline, the yields on bank deposits and Ukrainian government bonds are higher than inflation. A moderate cut in the key policy rate should not hinder interest in hryvnia savings, as it will continue to protect savings from inflationary depreciation.

Along with the key policy rate cut by 1 pp, the NBU is also cutting rates on overnight and three-month certificates of deposit to 13.5% and 16.5%, respectively.

The NBU is cutting interest rates on refinancing loans more significantly, by 2 pp to 17.5%.

In addition, given the fairly comfortable level of international reserves, the controlled situation in the foreign exchange market, and expectations of further international assistance, the NBU is planning a number of steps to liberalise the currency in the coming weeks.

The baseline scenario of the NBU's forecast envisages a cut in the key policy rate to 13% this year. The NBU will adapt its monetary policy in case of significant changes in the balance of risks.

In March, the NBU cut its key policy rate for the fifth time since last summer to 14.5%.

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