NBU Raises Discount Rate By 0.5 p.p. To 9%

The National Bank of Ukraine (NBU) has raised the discount rate by 0.5 p.p. to 9%.

The NBU has said this in a statement following a meeting of the Monetary Committee, Ukrainian News Agency reports.

It is noted that the peak of the inflationary surge has passed, but inflation is declining more slowly than expected.

"In October, the growth of consumer prices slowed down to 10.9% on an annualized basis. According to the National Bank, inflation continued to slow down in November. This was further facilitated by the exhaustion of last year's low comparison base, better yields, administrative decisions on utility tariffs and the impact of previous decisions to strengthen monetary policy. The effects of the current weakening of the hryvnia against the U.S. dollar are partially offset by its strengthening in other currencies of countries - major trading partners," the National Bank said.

At that, the regulator said that inflation is declining slowly as a result of a number of factors.

In particular, the pressure on prices of an ever wider range of goods and services of a consumer set is increasing due to the spillover effect from the rise in prices for food products and energy resources.

Also, inflation is fueled by the increase in business costs for logistics and labor costs.

Besides, despite a slight deterioration in consumer sentiment and quarantine restrictions, domestic consumer demand remains robust.

As a result, the current trajectory of inflation remains higher than it was assumed by the October macro forecast of the National Bank.

Additional pro-inflationary risks are also realized.

The increase in geopolitical tensions is reportedly negatively affecting the value of Ukrainian assets and the state of the foreign exchange market.

Given the current environment, global natural gas and food prices are likely to exceed tentatively anticipated levels in the future.

Global inflation continues to accelerate, prompting leading central banks to tighten monetary policy more rapidly.

This, in turn, leads to a decrease in investor interest in the assets of emerging market countries.

As Ukrainian News Agency earlier reported, on October 28, 2016, the NBU reduced the discount rate from 15% to 14%, and in December 2016 and January 2017 it kept it at the level of 14%, in April 2017 it reduced it to 13%, in May 2017 it reduced it to 12.5%, in October - increased to 13.5%, in December 2017 - to 14.5%, in January - to 16%, in March 2018 - to 17%, in July 2018 - to 17.5%, in September 2018 - to 18%, in April 2019 - reduced to 17.5%, in July 2019 - to 17%, in September 2019 - to 16.5%, in October 2019 - to 15.5%, in December 2019 - to 13.5%, in January 2020 - to 11%, in March - to 10%, in April - to 8%, in June - to 6%, in March 2021 - increased to 6.5%, in April 2021 - to 7.5%, in July - to 8%, in September - to 8.5%.