The NBU is considering the reduction of the key policy rate due to improved FX market conditions.

The noticeable improvement of the foreign exchange market has been caused not only by the seasonal increase in the supply of currency by farmers and the decrease in demand for energy imports but also by the effectiveness of the NBU’s previous measures to increase the attractiveness of hryvnia instruments, and further steps to ensure exchange rate sustainability when FX restrictions are eased.

However, according to the Central Bank, the full-scale war is ongoing so numerous risks remain, which can lead to negative effects: increased pressure on the exchange rate and international reserves, as well as unbalanced expectations, creating a threat of a reversal in the downward inflationary trend.

In addition, the regulator noted that the discount rate reduction may occur at the end of 2023. Most of the NBU Monetary Policy Committee members believe that the discount rate might be 21% at the end of this year and 18% by the end of next year.