The record high discount rate may last until the second quarter of next year.
The National Bank again kept the discount rate at 25% per annum, according to the Central Bank’s website on Thursday, October 20.
“Given the close-to-forecast dynamics of inflation and an increase in the balance of risks on the policy horizon, the Board of the National Bank decided to leave the discount rate at 25%… The updated forecast, like the previous one, provides for maintaining the discount rate at 25% for at least until the second quarter of 2024,” said the statement.
At the same time, the NBU is ready, if necessary, to raise the key rate above the forecast, and in the future will take additional measures to protect international reserves and maintain control of inflationary processes.
The regulator also kept the inflation forecast for 2022 at 30% and expects it to drop to 20.8% in 2023 and to 10% in 2024.
The National Bank expects the pace of price growth to begin to slow down next year due to the gradual establishment of logistics and production, declining global inflation and moderately tight financial conditions. This process will accelerate in the middle of the year, taking into account the effects of a high base of comparison and the expected easing of security risks, which is the main assumption of the new NBU forecast, which will contribute to a significant reduction in inflation. expectations and business risks, reduce production costs, improve logistics, including through Black Sea ports, and restoration of production capacities.
“All this will lead to a further increase in supply and stabilization of consumer prices. The government’s balanced debt policy with a refusal to finance the budget deficit will further improve inflationary expectations,” said report.
It is noted that the fastest decline in inflation in the coming years will be hindered, first of all, by the high cost of energy carriers, prompting the gradual bringing of tariffs for housing and communal services to market levels.
It can be recalled that the National Bank of Ukraine raised the discount rate by 1,500 basis points to 25% per year from 10% on June 2. At the same time, the regulator promised that it will not raise the discount rate.
The discount rate is equal to the economic value of money. At this rate, the NBU provides funds to commercial banks, which, in turn, lend to individuals and legal entities. Thus, the discount rate affects the value of credit resources.
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
I am Dylan Hudson, a dedicated and experienced journalist in the news industry. I have been working for Buna Times, as an author since 2018. My expertise lies in covering sports sections of the website and providing readers with reliable information on current sporting events.