The Board of the National Bank of Ukraine (NBU) has decided to reduce the discount rate by 0.5 percentage point to 13.5%.
This is stated in the message of the NBU, the Ukrainian News agency reports.
After a long period of decline, inflation remained unchanged in April and only slightly increased in May to 3.3% in annual terms.
Such growth rates of consumer prices were lower than expected by the NBU.
As before, the deviation from the forecast is primarily due to the rapid decrease in the price of raw food products due to favorable weather conditions, the effects of last year's high harvests and the reorientation of individual producers to the domestic market.
However, fundamental inflationary pressure corresponded to the NBU's April forecast – core inflation amounted to 4.4%, remaining within the target corridor for more than half a year.
On the one hand, secondary effects from the cheapening of raw food products, as well as the relative stability of inflationary expectations to exchange rate fluctuations restrained the growth of prices for a wide range of goods and services.
On the other hand, the further growth of business costs, including labor and electricity, stimulated price increases for a significant share of the components of the basic consumer price index.
The NBU expects a moderate acceleration of inflation in the coming months and its departure from the target range by the end of the year.
Such price dynamics will be determined primarily by the maintenance of pressure on business costs in war conditions, probably by slightly lower harvests after last year's records, by the transfer to prices of wage growth at a relatively high rate, as well as by an increase in electricity tariffs.
The basic scenario of the April macro forecast predicted a reduction of the discount rate to 13% in the current year, but the NBU is ready to adapt the monetary policy in case of changes in the balance of risks for inflation and the currency market.
Fundamental price pressure due to the war will persist, and inflation is expected to accelerate in the second half of the year.
Taking this into account, the NBU will direct its policy to maintain moderate inflation this year and return it to the target range of 5% ± 1 in. p. in the following years.
In the event of a change in the balance of risks for inflation and the stability of the foreign exchange market, the NBU may revise the forecast trajectory of the discount rate.
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 reduced 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 2024 – to 13.5%.
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