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Photo: NBU Press Center
NBU raised the discount rate to 6.5%
The key risk to macro-financial stability remains the tightening of quarantine restrictions both in Ukraine and in the world, the NBU noted.
The National Bank of Ukraine decided on March 5 to raise the discount rate to 6.5% from the 6% level at which it had held it since June 12, 2020. This was reported on the regulator’s website on Thursday, March 4.
Note that this is the first tightening of NBU’s policy since September 2018, when the rate was raised from 17.5 to 18%.
The National Bank indicated that they took into account the acceleration of inflation in early 2021, although it exceeded the central bank’s target range of 5% ± 1 c. the article was expected.
In January, consumer prices rose 6.1% on an annualized basis. According to preliminary estimates by the National Bank of Ukraine, inflation continued to accelerate in February, “says the message.
The main assumption, which is taken into account by the board of the National Bank of Ukraine, remains the continuation of cooperation with the IMF.
“The National Bank of Ukraine expects further progress from Ukraine in negotiations with the IMF. Cooperation with the IMF and other international partners is important in financing budgetary needs and providing the economy with additional incentives for growth. Thanks to this, Ukraine also to keep international reserves at around $ 30 billion, “notes NBU.
The key risk to macro-financial stability continues to be the strengthening of quarantine restrictions both in the country and in the world to counter the spread of the COVID-19 pandemic.
As the NBU notes, the deployment of vaccination in the world is slow, so the risks of further quarantine this year remain relevant.
“At the same time, the rapid recovery in business activity, the revival of commodity markets, the lagged effect of large-scale stimulus measures, as well as the likely realization of deferred consumer demand create risks of a accelerated global inflation. Countries – trading partners of Ukraine “, – noted the NBU.
Among other risks, the central bank observes volatility in world capital markets, a sharper deterioration in the terms of trade, an escalation of the military conflict in the east of the country or its borders.
Recall that on January 21, the National Bank kept the discount rate at the lowest level in history for the fifth time in a row: 6%. But then the regulator warned of a significant acceleration of inflation in 2021: by the middle of the year, the price growth rate can exceed 8%, so the NBU will start to increase the rate to bring inflation to the target range.
The discount rate is the equivalent of the value of money in the economy. At this rate, the NBU provides funds to commercial banks and these, in turn, lend to natural and legal persons. Therefore, the discount rate affects the cost of credit resources.
An increase in the discount rate indicates an increase in inflation and a fall in the economic growth of the country.
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