By KYIV. May 8 (Interfax-Ukraine) – Most of the members of the monetary policy committee of the National Bank of Ukraine in a discussion on April 26 expressed the opinion that by the end of 2023 the NBU may reduce the refinancing rate to 21%.
“They mostly agreed that the best time to start a cycle of rate cuts is the fourth quarter,” the National Bank’s website said on Monday.
The regulator indicated that 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 constant key policy rate will be an important tool for managing expectations and risks,” the NBU said.
The National Bank added that these members also agreed that the potential for lowering the rate on the horizon of monetary policy is significantly limited by the negative consequences of the war. Ukraine will need much time to restore production capacity, export and return forced migrants, while the need for imports during the recovery phase will be significant. Under such conditions, maintaining exchange rate stability will require the NBU to pursue a consistent policy to ensure the high attractiveness of hryvnia savings and reduce pressure on international reserves.
“Taking into account the expected international assistance, which will cover the current account deficit, in 2024 the NBU will be able to continue reducing the key policy rate, which, however, will be rather slow. According to the overwhelming majority of the committee members, at the end of next year, the rate will be 18%,” noted the central bank.
At the same time, according to the release, two participants in the discussion proposed an alternative vision of the further trajectory of the rate. In particular, one of them believes that a faster-than-expected decline in inflation will allow the NBU to cut the rate to 18% at the end of this year and to 14% in 2024.
