National Bank of Ukraine lowers key policy rate to 14.5%, market expected it to remain at 15%

MOSCOW. March 14 (Interfax) - The National Bank of Ukraine has decided to lower its key policy rate 50 basis points to 14.5% from 15% per annum, effective March 15.

"Taking into account the further deceleration of inflation and a steady improvement in expectations, a stable FX market, and a partial reduction in the risks associated with obtaining international assistance, the NBU Board decided to cut the key policy rate by 0.5 percentage points, to 14.5%," Ukrainian media quoted NBU Governor Andrei Pyshny as saying at a briefing, broadcast on YouTube on Thursday.

He said the step would support economic recovery without threatening macrofinancial stability, as the new level of interest rates on the NBU's operations is sufficient to maintain the attractiveness of hyvnia assets, safeguard exchange rate sustainability and keep inflation moderate.

"The NBU will continue the cycle of interest rate policy easing, provided that risks to inflation and exchange rate sustainability are sustainably reduced," Pyshny said.

"Maintaining a controlled situation in the FX market and moderate inflation, as well as increased foreign aid inflows, will create preconditions for further steps to cut the key policy rate and ease FX restrictions. They will promote lending and support economic recovery," he said.

Ahead of the NBU meeting, Ukrainian market participants forecast the regulator would hold the rate at 15% per annum, as per its own forecast, according to which it planned to leave the policy rate at 15% during the first half of 2024, and then move on to a cycle of lowering it to 14.5% in the third quarter and 14% by the end of the year.