Ukrainian refinancing rate's reduction to 16% sends message without having considerable immediate effect - head of banking association

MOSCOW. Oct 27 (Interfax) - The reduction by the National Bank of Ukraine (NBU) of the refinancing rate to 16% from 20%, with the 'working' rates left unchanged, will not have a considerable effect on the banking market but is a signal that the rates will keep being reduced in the future, in the view of Vladimir Mudry, board chairman of the Independent Association of Banks of Ukraine (IABU) and chairman of OTP Bank.

"The market has received a clear message from the regulator that the principal macroeconomic indicators show better dynamics than was anticipated before, and the rates will continue to be reduced. There'll be no considerable changes for now, but the budget process has already been started, and the banks should take this into account in their planning and lending policy," Ukrainian media quoted Mudry as saying in a statement.

Ukrainian domestic government bonds are more appealing now, which will influence the policy of multiple banks very quickly, he said.

In addition, the restriction imposed by the regulator on purchasing three-month certificates of deposit in November will not considerably affect the volume of their placement.

The possibility that the refinancing rate could be reduced further to 15% on December 14 and would be kept at this level throughout 2024 is quite realistic, considering the inflation and GDP forecast, Mudry said.

Speaking of the macroeconomic forecast's revision by the NBU, Mudry said it was basically consistent with his expectations. "Indeed, it adds some optimism, but at the same time, it mentions new risk forecasts. The bottom line is, the economy is gradually recovering, and this trend is gaining momentum," he said.

As reported, the NBU has considerably improved its macroeconomic forecast for 2023 for the third time this year and currently expects the economy to grow by 4.9% and inflation to decelerate to 5.8%. The NBU has also slightly revised its GDP forecast for 2024 up to 3.6% from 3.5%, while at the same time raising its inflation forecast to 9.5% from 8.5%.