As early as tomorrow, the National Bank of Ukraine (NBU) will reduce the discount rate from 16% to 15% per annum — this will help maintain the attractiveness of hryvnia savings, the NBU believes.
The National Bank notes a greater decrease in inflation than expected. This was facilitated by the expansion of the supply of food products from the new harvest and the strong exchange rate of the hryvnia. At the same time, there are risks of accelerating inflation due to logistical difficulties on the western borders, caused, in particular, by blockades of Polish and Slovak carriers.
The NBU also considers the successful abandonment of a fixed exchange rate in favor of managed flexibility. The increased demand for foreign currency was only at the beginning of the new regime, and later the balance of supply and demand leveled off. In November, the regulator spent $2.5 billion from reserves, which is less than in previous months.
However, the structural deficit of foreign currency on the market remains, so the National Bank will maintain an active presence on the foreign exchange market to meet structural demand and smooth out exchange rate fluctuations.
Discount rate
The accounting rate is one of the main indicators of the economy. This is the percentage at which the NBU provides funds to banks and, accordingly, below which it is unprofitable for commercial banks to give loans to clients. Thanks to the discount rate, the NBU affects inflation (price growth).
A decrease in the interest rate makes loans more accessible (because the interest on them becomes lower), in connection with which banks begin to issue more money, there is more of it in the economy, and when there is more money, inflation gathers momentum. In this case, there is less money on deposits, and more "on hand" — accordingly, people spend more.
But higher inflation actually leads to a devaluation of the hryvnia, because for the same amount, with rising prices, you can buy fewer goods.
And all this works in the opposite way — when the rate rises, loans and deposits become more expensive, they stimulate the population to save more. As a result, money in the economy becomes less, inflation slows down.
- In October, the National Bank of Ukraine set the discount rate at the level of 16%, before that it was 20%.