The NBU has decided to cut the key policy rate

The National Bank of Ukraine (NBU) has decided to cut its key policy rate, setting the new level at 15% per annum effective 15 December 2023. This is a continuation of the cycle of key policy rate cuts that began in July.

This was reported by the NBU press service, pointing to the trends that led to this decision of the regulator. Important factors here include the successful adaptation of the foreign exchange market to the new exchange rate regime, further decline in inflation and improvement in inflation expectations, as well as the continued attractiveness of hryvnia savings.

The NBU notes that in November, inflation fell to 5.1%, which is higher than expected. This was largely driven by good harvests and a general improvement in expectations, supported by a stronger hryvnia. The foreign exchange market remained resilient, and the NBU's move to managed exchange rate flexibility was accompanied by appropriate measures.

The regulator compensates for the structural deficit of foreign currency on a daily basis, and the level of international reserves is considered sufficient to maintain exchange rate stability. However, the main risk remains the possible impact of a full-scale war on inflationary dynamics and economic development. The risk has already been partially reflected in the inflow of international aid, but it is expected to resume.

The NBU also takes into account the high adaptability of Ukrainian businesses and citizens to wartime challenges, which neutralizes the negative effects of certain risks. The regulator emphasizes its readiness to flexibly adapt its interest rate policy to changes in the balance of risks to exchange rate stability and inflation, ensuring the stability of the financial and economic environment.