NBU kept the discount rate at 6%

The Board of the National Bank of Ukraine (NBU) decided to keep the discount rate at 6%, the regulator’s website reports on October 22. “Maintaining a soft monetary policy is aimed at supporting the economic recovery and achieving the inflation target,” the message says. The National Bank noted that in September inflation remained below the target range (4-6%), due to an increase in the supply of food products, the growth rate of consumer prices slowed to 2.3% in annual terms.

“This factor neutralized the back pressure on prices from other factors: the weakening of the hryvnia, the rise in energy prices, the recovery of economic activity and consumer demand,” the NBU said. At the same time, the National Bank indicated that inflationary expectations of business and the population continued to deteriorate, but the consumer sentiment index improved. Earlier in 2020, on April 23, the National Bank of Ukraine lowered the discount rate from 10 to 8%.

On June 11, the regulator lowered this target by 6% – the lowest level in the entire history of independent Ukraine. Since then, the rate has remained unchanged for more than four months. The change in the discount rate affects the cost of loans provided by the National Bank to commercial banks.

The higher it is, the more expensive refinancing loans are for banks, the more expensive they offer their own loans, the fewer borrowers take out loans. When inflation and the risks of macroeconomic instability in a country intensify, the central bank raises the interest rate and implements a tight monetary policy. This means that lending is already more risky, so the price of money in the economy is growing.

With a decrease in inflation and an improvement in the macroeconomic situation, the discount rate usually decreases and this causes a gradual reduction in the cost of deposits and loans.

Leave a Reply

Your email address will not be published.

You may use these <abbr title="HyperText Markup Language">HTML</abbr> tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

*