The NBU keeps the key rate at 25% per annum

At the meeting of the NBU Board, a decision was made to maintain the key rate at 25% per annum. It is clarified that this will support the attractiveness of hryvnia instruments, ensure stability in the currency market, and reduce inflation. As a result, conditions will be created for further gradual easing of currency restrictions, which will contribute to the development of the economy, according to the National Bank.

This is stated on the regulator's website.

As reported by the NBU, the pace of consumer price growth continued to slow faster than expected. In May, inflation fell to 15.3% on an annual basis. This was facilitated by sufficient food and fuel supply, strengthening of the cash exchange rate of the hryvnia, and improvements in inflation and exchange rate expectations. To achieve currency market stabilisation and improve expectations, the high key rate was maintained, and the NBU took additional measures to increase the attractiveness of hryvnia instruments.

"Losses from the war are increasing, but steady inflows of international aid and a revival of the domestic debt market make it possible to cover a significant budget deficit without emission financing," the National Bank reported, adding that the key risk for inflation dynamics and economic development is a longer term, as well as the unpredictable nature and intensity of a full-scale war.

In addition, the regulator specifies that the russian occupiers' undermining of the Kakhovka HPP will have negative consequences for prices. According to the NBU's preliminary estimates, this act of terrorism will contribute an additional 0.3 pp to this year's inflation due to the complication of several enterprises' operations and partial crop loss, primarily vegetables.

It is noted that the National Bank is ready to start a cycle of lowering the key rate earlier than predicted in the April macro forecast, if the growth of the real yield of hryvnia instruments and the reduction of risks for exchange rate stability continue to occur faster than expected.

Background. Mind previously reported that the National Bank had maintained the key rate at 25% per annum.