On December 14, the National Bank of Ukraine lowered the discount rate to 15%.
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This decision of the NBU Board takes into account the following trends:
- successful adaptation of the foreign exchange market to the new exchange rate regime;
- further decline in inflation and improvement in inflation expectations;
- maintaining the attractiveness of savings in hryvnia.
Inflation fell to 5.1% in November, even slightly faster than expected. This was facilitated by both good harvests and a general improvement in expectations against the backdrop of a stronger hryvnia exchange rate.
The foreign exchange market remained stable after the transition to a regime of managed exchange rate flexibility. The NBU daily compensates for the structural deficit of the currency, and the exchange rate fluctuates in both directions under the influence of changes in the balance of supply and demand. The level of international reserves is sufficient to maintain exchange rate stability.
According to the regulator, the key risk for inflation dynamics and economic development remains the course of a full-scale war.
At the same time, the NBU reduced the rate on overnight certificates of deposit. This decision was not news for the financial market; the NBU said in its forecasts that by the end of the year the rate is expected to be 15%.
The rate on three monthly certificates of deposit dated December 15 is 19%. Refinancing rate – 21%.
The difference between overnight and three-month certificates is simple. Overnight is when an investor deposits available funds with the NBU for one day. Any funds can be placed under such an instrument.
Three-month certificates are an investment of money on deposit with the NBU for three months. And you can invest only those funds that were raised from the population for deposits for a period of three months or more; in different periods there were different coefficients for the amounts placed.
The regulator said that the NBU does not plan to reduce the rate in 2024, due to the forecast of increased inflation and in order to have room to liberalize the foreign exchange market. To liberalize the foreign exchange market, the attractiveness of hryvnia investment instruments must remain so that free funds do not flow into the foreign exchange market, but remain in hryvnia securities.
The NBU focuses on the exchange rate issue. Adaptation to controlled flexibility was successful. Banks are more active in the money market. The exchange rate moves in both directions, both depreciation and strengthening.
Source: Racurs
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