The National Bank of Ukraine cut interest rates for the second consecutive time in the 19th month of the war with Russia, reducing the policy rate to 20 percent. Thus, a total of 5 points of interest rate reduction was made in the last two meetings.
The National Bank of Ukraine (NBU) cut interest rates for the second time in a row at its monetary policy meeting on Thursday, reducing the interest rate to 20 percent as the war with Russia approaches its 19th month.
The Central Bank last reduced the interest rate from 25 percent to 22 percent on July 27.
In the statement made by the bank, “The continued decline in inflation and the NBU’s ability to ensure the sustainability of the Foreign Exchange market make it possible to continue the interest rate reduction cycle while maintaining the sufficient attractiveness of hryvnia savings. Such a step will support economic recovery without posing a threat to macroeconomic and financial stability.”
The NBU said it plans to continue its rate-cutting cycle but will act cautiously given the great uncertainty and high war-related risks.
Bankers and analysts were expecting an interest rate cut because inflation in the country had slowed down faster than expected since the beginning of the year. It showed that consumer price inflation in Ukraine slowed down to 8.6 percent on an annual basis in August.
In the statement made after the decision, it was stated that consumer inflation fell faster than expected, thanks to high food supply and efficient harvests contributing to the decrease in grain, flour, vegetable and fruit prices.
Still, the bank stated that core inflation was realized at 10 percent in August, close to the forecasts, and said, “The general downward trend in inflation will continue, but the potential for a rapid decrease is almost exhausted.”