The NBU leaves the key policy rate at 15.5%: what it means for businesses and people
1 August 13:29
The National Bank of Ukraine has decided to keep the key policy rate at 15.5% at least until the end of 2025. This is stated in the NBU’s July inflation report, "Komersant Ukrainian" reports.
“Maintaining the key policy rate at 15.5% is an important prerequisite for a steady slowdown in inflation to the 5% target. At the same time, this decision will have a neutral impact on lending, given the high competition of banks for quality borrowers.”
The NBU notes that previous steps to tighten monetary policy have been effective:
- interest rates on term hryvnia deposits and government bonds have increased;
- demand for these instruments increased;
- net purchases of foreign currency by households declined.
This helped to maintain the stability of the FX market and limit price pressure. These factors helped to reverse the inflationary trend in June.
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It is impossible to mitigate
The NBU emphasizes that it is currently almost impossible to ease interest rate policy:
“…given the slower-than-expected decline in inflation and the balance of risks to price dynamics, the NBU does not currently see any room for easing interest rate policy.”
Therefore, monetary conditions will remain tight until the NBU is confident that there are no threats to inflation:
“The NBU will move to a cycle of interest rate policy easing only when it is convinced that there are no threats to a sustainable slowdown in inflation to the 5% target on the policy horizon.”
What it means for businesses and individuals
The key policy rate primarily affects lending conditions in the banking system – both for financial institutions and for businesses and individuals. The NBU logically argues that since the rate is maintained, lending conditions will not change.
“…this decision will have a neutral impact on lending, given the high competition among banks for quality borrowers. Lending conditions remain close to pre-conflict levels and the most affordable since the beginning of the full-scale war, and lending dynamics are brisk (the growth rate of net hryvnia loans to businesses in recent months has been about 30% year-on-year).”
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