The National Bank of Ukraine has decided to maintain the discount rate at 15%. This decision by the NBU’s board was made against the backdrop of increasing external risks, heightened inflation expectations among the population, and increased volatility in the foreign exchange market.
This is reported by Finway
Reasons for the NBU’s Decision
The regulator emphasized that it is currently impractical to lower the discount rate, as was previously anticipated in the January macroeconomic forecast. Maintaining the rate at its current level, according to the NBU, will help support the attractiveness of hryvnia-denominated assets, contribute to the stability of the foreign exchange market, and ensure control over inflationary processes amid growing economic and geopolitical uncertainty.
“Given the strengthening of external risks, the deterioration of inflation expectations among the population, and the increased volatility in the foreign exchange market, the NBU considers it appropriate to refrain from further lowering the discount rate, as outlined in the January forecast.”
The Role of the Discount Rate in Monetary Policy
The discount rate is a key tool that the National Bank uses to determine the benchmark for the cost of funds raised and placed by banks and other participants in the monetary market. It affects the level of interest rates in the banking system, determines the cost of loans and deposits, and also influences overall economic dynamics.
In the baseline scenario of the macroeconomic forecast released in January, a gradual decrease in the discount rate was anticipated in the medium term. However, under the current conditions, the NBU has decided to refrain from further easing monetary policy to avoid additional risks to inflation and financial stability.