NBU Retains Discount Rate At 25%

The National Bank of Ukraine (NBU) has retained the discount rate at the level of 25%.

The NBU has said this in a statement, Ukrainian News Agency reports.

The regulator reports that inflation grew rapidly and reached 21.5% year over year in June mainly due to shocks caused by the war and due to global price pressures.

The war resulted in broken supply chains, reduced supply of individual goods, increased business costs, physical destruction of production facilities and infrastructure, and temporary occupation of individual territories.

Maintaining high energy prices and record levels of inflation in partner countries also significantly increased the price pressure in Ukraine.

Inflation expectations of businesses and households have also increased significantly.

In practice, this was reflected in the deterioration of the term structure of deposits in the banking system and an increase in costs for individual goods of long-term use, mainly imported ones.

As a result, inflation has increased at a high rate in recent months and reached 21.5% year over year in June.

The price dynamics were geographically uneven - the growth rate of prices in the regions under temporary occupation or near combat operations reached the peak values.

As before, administrative measures of the National Bank and the Government of Ukraine remained the key levers in containing inflation, primarily fixing the hryvnia exchange rate and tariffs for gas and heat.

The restraining effect on prices was also the establishment of the supply of products across the western borders and the excess supply of agricultural raw materials formed as a result of the blockade of seaports.

Inflationary pressure will continue: at the end of 2022, inflation will exceed 30%.

In subsequent years, it will slow down significantly, although it will still be significantly higher than the National Bank's goal of 5% primarily due to the consequences of the war.

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%, in December - to 9%, in January 2022 - by 1 p.p. to 10%, in June 2022 - by 15 p.p. to 25%.

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