The NBU predicts the discount rate at the level of 21% at the end of the year
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A reduction in the NBU discount rate, on which the cost of loans depends, may occur at the end of 2023. The decision will be related to the easing of currency restrictions. This is stated in the results of the meeting of the Monetary Policy Committee of the National Bank.
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According to the report, nine members of the KMP spoke in favor of keeping the discount rate at the level of 25% in April. Two members of the KMP spoke in favor of reducing the discount rate to 24% in April.
All members of the CMP expect the maintenance of sufficiently tight monetary conditions in the future, although their vision of the pace and timing of the transition to a reduction in the discount rate differs.
Rate reduction
Most of the participants in the discussion believe that by the end of 2023, the NBU can reduce the discount rate to 21%. They mostly agreed that the fourth quarter is the optimal time to start the rate reduction cycle.
“Such timing is determined by the priority of the task of easing part of the currency restrictions. At the initial stage of currency liberalization, a fixed exchange rate will be an important tool for managing expectations and risks. Only the NBU will have sufficient confirmation of the controllability of exchange rate and inflationary processes under the conditions of softening of administrative procedures.” will be able to start a cycle of lowering the discount rate without creating threats to macro-financial stability,” the message says.
Read: NBU kept the discount rate at 25%
These members of the KMP also agreed that the potential for reducing the discount rate on the horizon of monetary policy is significantly limited by the negative consequences of the war. Ukraine will need considerable time to restore production capacity, exports and the return of forced migrants, while import needs at the stage of recovery will be significant.
“Under such conditions, maintaining exchange rate stability will require the NBU to implement a consistent policy to ensure the high attractiveness of savings in the hryvnia and reduce pressure on international reserves. Taking into account the expected international aid, which will cover the current account deficit, in 2024 the NBU will be able to continue lowering the discount rate, which, however, will be rather slow,” the NBU noted.
According to the overwhelming majority of KMP members, at the end of next year the discount rate will be 18%.
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Editor of the news feed Yaroslav Holoborodko Writes on the topics: Macroeconomics, stock market, cryptocurrency
- NBU
- Accounting rate
Source: Ministry of Finance
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