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The National Bank reduced the discount rate for the second time in a row

Photo: NBU Press Center

The National Bank expects the cycle of interest rate cuts to continue, but promises to act cautiously to ensure macro-financial stability.

The National Bank of Ukraine decided to reduce the discount rate to 22% from the level of 20%, where it has kept it since June 6, 2022. This was reported on the regulator’s website on Thursday, September 14.

Thus, the NBU continued the rate reduction cycle, which began in July after a one-year break and kept the rate at 25%.

“A further slowdown in inflation and the ability of the NBU to ensure the stability of the exchange rate allows us to continue the cycle of rate cuts while maintaining the sufficient attractiveness of hryvnia savings. Such a step will support economic recovery and at the same time will not present a threat to macro-financial stability,” the report said.

The National Bank expects the discount rate reduction cycle to continue. At the same time, due to the great uncertainty and high risk associated with the war, the NBU will undertake to act cautiously to continue to ensure macro-financial stability.

“In the event of worsening expectations, a noticeable decrease in the attractiveness of hryvnia instruments and higher risks for the stability of the exchange rate, the NBU will adjust its decisions and the discount forecast rate accordingly,” the regulator said.

Earlier, the National Bank upgraded its forecasts for inflation and GDP, taking into account the recovery in the manufacturing and services sectors.

And, according to the Ministry of Economy, real GDP growth in 2023 could reach up to 5%, however, taking into account the existing risks, the government keeps the forecast at 2.8%.

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The discount rate is equal to the economic value of money. At this rate, the NBU provides funds to commercial banks, and they lend to individuals and legal entities. Consequently, the discount rate affects the value of credit sources. An increase in the discount rate indicates an increase in the level of inflation and a decrease in the rate of economic growth in the country.
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Source: korrespondent

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