Deposit rates in Ukraine could stay at current levels in 2024 if inflation quickens to 10% - expert opinion

MOSCOW. Nov 27 (Interfax) - Deposit rates in Ukraine could stay at their current levels in 2024 if, as expected, inflation quickens to 8-10% and the National Bank of Ukraine's key policy rate is 14-16%, said Andrei Dubas, president of the Association of Ukrainian Banks.

"If we take, for example, the UIRD [Ukrainian Index of Retail Deposit Rates] then I see they have already reacted to the National Bank's recent decision [to lower] the key rate to 16%. I think it will remain somewhere within that level, possibly throughout 2024," Dubas said in a commentary for Ukrainian media. "Deposit rates will probably remain at the levels they are now," Ukrainian media quoted him as saying.

Regarding October's steep drop in inflation to 5.3%, Dubas said the main reasons were the freeze on utility charges, the adaptation of households to crisis conditions, logistics problems when exporting farm produce and the blockade of ports.

"I also think that one of the key things is that by various estimates some 6 million people have left Ukraine. These are young and middle-aged people who worked in Ukraine before the crisis and earned their money and spent it in Ukraine. Now they do so in other countries," he said, listing the factors behind the slowdown in inflation.

Consumer price inflation slowed to 5.3% in annual terms in October from 7.1% in September, reports have said.

The National Bank of Ukraine at the end of October again improved its inflation outlook for the year, from 10.6% to 5.8%, and but worsened that for 2024 from 8.5% to 9.5%. The government at the beginning of November improved its inflation outlook for 2023 from 14.7% to 7.1% and that for 2024 from 10.8% to 9.7%.

The three-month local currency UIRD is now 14.11% per annum and the six-month rate is 14.14%.