The necessary conditions for further discount rate reductions in Ukraine are no longer present.

Thanks to favorable macro-financial trends, the National Bank of Ukraine has reduced the discount rate from 25% to 13% in one year. However, the NBU does not currently see further prerequisites for lowering the discount rate, according to the Inflation Report. The macro forecast’s base scenario does not foresee a resumption of the discount rate reduction cycle until 2025.

“In the future, the scope for softening the interest rate policy is limited given the need to maintain the stability of the foreign exchange market, maintain moderate inflation in 2024-2025, and bring it to the 5% target,” the NBU added.

Most of the Monetary Policy Committee members are convinced that at the economy’s current stage that includes an expected acceleration of inflation and the likely deterioration of inflation expectations, it is advisable to stop the cycle of lowering the discount rate at least until the end of 2024. Some financiers assume that the NBU will even have to raise the discount rate under certain circumstances.