National Bank of Ukraine again holds key rate at 25%, as expected
MOSCOW. Oct 20 (Interfax) - The National Bank of Ukraine on Thursday again decided to hold its key policy rate at 25% per annum, as the market expected.
"As the inflation dynamics are close to the forecast and the balance of risks is skewed upward over the policy horizon, the NBU Board decided to keep the key policy rate at 25%," the NBU said in a statement, posted on its website.
"The updated forecast, like the previous one, envisages that the key policy rate will be maintained at 25% at least until Q2 2024," it said.
If required, the NBU is prepared to raise the key policy rate above its forecast and will further deploy additional measures to protect international reserves, as well as to maintain control over inflation, it said.
Bankers expected that the NBU would at its October 20 meeting decide to keep the discount rate at 25% and use other monetary policy tools for regulation.
"In our opinion, there are no grounds today to adjust the rate one way or the other, because the transmission effect of the June decision to raise the rate has not yet been fully realized," said Alexei Blinov, head of the analytical department at Alfa-Bank Ukraine.
He said the continuing acceleration of inflation, on the one hand, does not require an additional monetary response, and on the other hand, confirms the expediency of the NBU's decision to raise the rate sharply four months ago. "Compared to the current inflation rate, the discount rate is even lower than the neutral one. It is too early to base monetary decisions on forecasts for 2023, because the level of uncertainty remains very high," the expert said.
The CEO of Unex Bank, Ivan Svitek, also expected the NBU to keep the rate unchanged. "Inflation accelerated to 24.6% in September. This is an alarmingly high level, but it is still lower than the NBU's forecast for inflation at 25.6% in the third quarter. This means that a further increase in the rate is pointless: it would not will bring any benefits in terms of slowing inflation," the banker said.
Konstantin Khvedchuk, strategic development analyst at Pivdenny Bank, agreed. "The discount rate will probably remain unchanged, but additional tools will be used to strengthen its influence on market rates - an increase in the required reserves ratio or placement of term deposit certificates," he said.
Khvedchuk said that the forecast policy rate path was also likely to remain unchanged, at 25% during 2023, but there were still risks of a further increase.
Oksana Shveda, deputy CEO of Credit Dnepr Bank, said that on the one hand, the 25% rate is not the limit, but, on the other hand, the regulator had other monetary policy tools in its arsenal, for example, open markets operations, a rate corridor and required reserve ratios.