The National Bank of Ukraine decided to lower the discount rate to 13.5%, continuing the cycle of softening of the interest policy, which will allow to support the development of lending and recovery of the economy without additional risks for price and financial stability.
Discount rate reduction
Improvement in inflation expectations
Consumer inflation slowed to 3.2% in March, which is lower than NBU forecasts. This is due to unforeseen factors, such as favorable winter weather, which increased the supply of raw products and reduced business energy costs. Core inflation also slowed to 4.2%, but remained close to expectations.
Improvement of economic prospects
The NBU revised the inflation forecast from 8.6% to 8. 2% by 2024 and expects its stabilization in the target range of 5% ± 1 in. p. during the following years. The economy is forecast to grow by 3% in 2024 and by 4.5-5% in 2025-2026, given a shift in international aid receipts and a revival in domestic and external demand. However, the consequences of Russia's attacks on energy have worsened the real GDP growth forecast.
International support and risks
In March, Ukraine received about $9 billion from international partners, which made it possible to increase international reserves to almost $44 billion. It is expected that Ukraine can count on $38 billion in foreign budget aid this year, while strengthening its own capacity for self-sufficiency.
Risks remain relevant, such as additional budgetary needs for defense, infrastructure damage, export restrictions due to border closures, negative migration trends and the worsening of the situation in the Middle East.
Changes in NBU rates
Along with the reduction of the discount rate to 13.5%, the NBU also reduced the rates for overnight deposit certificates and three-month deposit certificates to 13 .5% and 16.5%, respectively. In addition, refinancing loan rates were reduced by 2%. p. up to 17.5%.
Glossary
- The National Bank of Ukraine (NBU) is the central bank of Ukraine, responsible for monetary policy and ensuring the stability of the national currency.
- Accounting rate - the interest rate at which the NBU grants loans to commercial banks.
- Inflation is an increase in the general level of prices for goods and services in the economy.
- Real GDP is an indicator of the value of goods and services produced in the economy, adjusted for inflation.
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Answers to questions
Why did the National Bank decide to lower the discount rate?
What is the inflation forecast for 2024?
What is the expected economic growth in the coming years?
What risks remain relevant for the economy of Ukraine?
What changes does the NBU introduce in addition to lowering the discount rate?
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Discussion of the topic – The National Bank lowered the discount rate to 13.5%: what does this mean for the economy of Ukraine?
The National Bank of Ukraine (NBU) lowered the discount rate from 14.5% to 13.5% from April 26. This decision is aimed at supporting credit development and economic recovery without additional risks to price and financial stability.
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Вольфганг
It is interesting that the National Bank lowered the discount rate again. This is certainly a positive step to stimulate lending and economic growth. But I am a little worried about inflation forecasts for 2024-2026 - 8.2%, 6% and 5%, respectively. Is this too high for a sustainable economy? 🤔
Софі
Indeed, Wolfgang, there are some concerns with these inflation forecasts. However, it is important to take into account that Ukraine is still at war, and the restoration of infrastructure and economy requires significant resources. The NBU's flexible monetary policy is aimed at supporting this process. 💪
Джованні
And I am glad that Ukraine can count on $38 billion in foreign budget aid this year. This is a huge support from international partners! I hope these funds will help accelerate the recovery of critical infrastructure and the energy sector. 🙌
Пйотр
Let's not forget about the risks mentioned in the message. Potential infrastructure damage, transportation problems, and migration challenges could severely hamper economic growth. But I believe that Ukraine will overcome these difficulties with joint efforts. 💪🇺🇦
Борис
Okay, okay, you're all talking about inflation and economic growth here. Isn't it more important to ensure stability and security in the country? Without it, no economic indicators will matter. Maybe it's better to focus on winning the war and then think about the rest? 🧐
Ганна
Mr. Boris, you are right that security and victory in the war is the main priority. But the economy also plays a critical role in providing resources for defense and reconstruction. So these issues are closely related. 🔄 It is important to maintain balance and strategically allocate resources.
Алессандро
I am proud that Ukraine is actively rebuilding its economy even in such difficult conditions. This testifies to the strong spirit and determination of the Ukrainian people! 🇺🇦💪 I am sure that with the help of international partners and the right strategy, everything will be overcome.
Наталія
Can't disagree with you guys. The situation is really difficult, but we see that the National Bank is trying to maintain a balance between controlling inflation and supporting economic development. I hope that such a balanced policy will bear fruit. And we, as citizens, should do everything possible to win and rebuild our wonderful country! 🙌🇺🇦