NBU raises discount rate by 1 pp to 14.5%

The Board of the National Bank of Ukraine (NBU) has decided to raise the discount rate by 1 percentage point to 14.5%.

This is announced in the NBU statement, Ukrainian News Agency reports.

This decision is aimed at maintaining the stability of the foreign exchange market, keeping inflation expectations under control, reversing the inflation trend and gradually slowing inflation to the 5% target.

Containing price pressure will likely require further tightening of interest rate policy.

Inflation reached 12% in 2024, and price pressure will persist in early 2025.

In December 2024, inflation accelerated to 12% in annual terms, which exceeded the previous NBU forecast (Inflation Report, October 2024).

According to the NBU, the acceleration of inflation continued in January.

The high growth rates of consumer prices were largely determined by temporary factors, primarily related to the effects of last year's poor harvests. At the same time, fundamental price pressure also intensified.

This is evidenced by the further acceleration of core inflation (to 10.7% y/y in December), in particular due to the rapid growth of prices for services (12.5% y/y in December).

Such price dynamics were due to an increase in business spending on raw materials, supplies and electricity, as well as an increase in salaries against the background of a persistent shortage of personnel.

At the same time, in recent months, price growth has been somewhat restrained by the strengthening of the hryvnia exchange rate against the euro, which is of great importance for Ukrainian imports.

The transition of inflation to a double-digit level negatively affects the inflation expectations of the population and business.

However, the expectations of financial analysts and banks remain relatively stable.

As Ukrainian News Agency earlier reported, in March 2021, the NBU raised the discount rate to 6.5%, in April - to 7%, in July - to 8%, in September - to 8.5%, in December - to 9%, in January 2022 - to 10%, in June 2022 - to 25%.

In July 2023, the NBU lowered the discount rate from 25% to 22%, in September - to 20%, in October - to 16%, in December - to 15%, in March 2024 - to 14.5%, in April - to 13.5%, in June - to 13%, in December 2024 it increased to 13.5%.

At the same time, on December 20, the Board of Directors of the Bank of russia decided to maintain the key rate at 21.00% per annum.