The Board of the National Bank decided to reduce the discount rate from 14.5% to 13.5% per annum from April 26, 2024.
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This was stated by the head of the NBU Andriy Pyshny during a briefing on monetary policy.
Given the weakening of actual and expected price pressures, as well as the reduced risks of international financial support, the National Bank continues the cycle of easing interest rate policy. This will support the development of lending and economic recovery without additional risks to price and financial stability, Pyshny said.
Along with the reduction in the discount rate, the rates on overnight certificates of deposit and three-month certificates of deposit are also reduced by 1% – to 13.5% and 16.5%, respectively.
In addition, from April 25, the NBU significantly reduces rates on refinancing loans – by 2 and. n. up to 17.5%. In the context of the interest rate policy easing cycle, it becomes less practical to maintain a significant difference between the refinancing loan rate and the discount rate.
Earlier in March, the regulator reduced the rate by 0.5% to 14.5%. On January 25, the NBU board decided to maintain the discount rate at 15% per annum, and on December 14, 2023, reduced it from 16 to 15%.
A change in the discount rate is an important signal for banks to determine interest rates on deposits and loans. The higher the key rate, the more expensive loans and deposits in the national currency.
The maximum discount rate in Ukraine was 300% (October-December 1994), and the minimum 6% (June 2020 – March 2021).
Forecasts and risks from the NBU
Pyshny noted a slowdown in inflation from 4.3% in February to 3.2% in March. He also announced an improvement in the NBU’s inflation forecast for 2024 from 8.6% to 8.2%. But at the same time, the NBU worsened its GDP forecast for 2024 from 3.6% to 3.0% due to Russian attacks on the energy sector and other infrastructure facilities.
Pyshny named the following current military risks for the economy:
- The emergence of additional budgetary needs to support defense capabilities or cover significant deficits, in particular in the energy sector.
- Significant damage to infrastructure, primarily energy and port infrastructure, which limits economic activity and puts pressure on prices.
- Continuation of partial blocking of borders by some EU countries for freight transport, which will restrain exports and make imports more expensive.
- Deepening negative migration trends.
- The aggravation of the situation in the Middle East, which, in particular, increases the risks of possible interruptions in the supply of energy resources and their rise in price for the global economy.
Source: Racurs
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