Should pro-inflationary risks materialize, the national regulator is ready to strengthen exchange rate and monetary conditions to maintain the manageability of inflationary processes.
The Board of the Central Bank of Ukraine decided not to change the discount rate – it will remain at the level 25% per annum. This was reported by the press service of the NBU.
They said this would help strengthen monetary transmission, maintain exchange rate stability and gradually lower inflation in 2023.
“Given the expected price dynamics, still high inflationary expectations and an upwardly shifted risk balance, the Central Bank Board decided to leave the discount rate at 25% and increase banks’ reserve requirements to strengthen monetary transmission.” said explanation.
The Central Bank stressed that, in case of pro-inflation risks, the national regulator is ready to strengthen monetary conditions to maintain the manageability of exchange rate and inflationary processes.
Recall that at the beginning of June 2022, the Board of the Central Bank of Ukraine decided to increase the discount rate from 10% to 25% per annum. In January, the NBU set the discount rate at 10% per annum. At the time, the Central Bank expected inflation to slow in 2022.
Earlier, CASE Ukraine Assistant Specialist Evgeniy Dubogryz said that from an economic point of view there can be no talk of lowering the NBU rate, but it is worth considering raising it.
“A rate of 25% in June seemed like a good step. At that time, under these conditions, inflation was still 16.4%, and the official rate at that time was 29.25, and cash is still 32-33 UAH / USD. Now inflation is expected to be over 30% this year, plus next year it will be exactly 20% (even 30%, despite the NBU being optimistic here and talking tailing from 20% so far). It looks like you”. So it does not suit those who want “credit for all”, that is, they are in favor of lowering the rate and printing money in bulk. And (such an NBU discount rate, – Focus) it does not fulfill its function of fighting inflation because it is lower than expected inflation and the transmission mechanism works very slowly because the war. The 25% discount rate is indeed here and now seems like a very half-hearted solution.“, – said Evgeny Dubogryz.
Moreover Focus He wrote that the increase in the NBU rate should encourage an increase in the cost of resources, that is, it should affect deposit rates.
Source: Focus
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