Ukraine: NBU keeps policy rate unchanged in March, introduces measures to support banking sector
At its meeting on 16 March, the National Bank of Ukraine (NBU) maintained its key policy rate unchanged at 25.00%. Meanwhile, effective from 7 April, the NBU will introduce three-month certificates of deposit with a fixed rate equal to the key policy rate, as well as cut interest rates on overnight certificates of deposit to 20.00%. Lastly, starting from 11 May, preferential reserve requirement ratios for deposits will only apply to deposits maturing in more than three months.
The Bank’s policy rate decision was supported by softer price pressures in the first two months of 2023; inflation came in at 24.9% in February. That said, the Bank found it necessary to adopt additional measures to support the disinflationary trend, shield household savings from inflation and strengthen the banking sector. As such, the NBU announced the new terms for certificates of deposit, encouraging hryvnia deposits to curb risks in foreign exchange markets and pressures on international reserves.
Looking ahead, the Bank stated it would “continue to deliver the monetary conditions required for a steady drop in inflation, improving inflation expectations, and supporting exchange rate sustainability”. This contrasted January’s statement that the key policy rate would be held at 25.00% until Q1 2024, suggesting policy may be eased sooner than expected. The majority of our panelists anticipate the NBU to begin lowering its key policy rate by Q3 2023.
That said, an escalation of the war could delay monetary policy easing. Additional fiscal pressures due to the war, uncertainty around the Black Sea grain corridor and early rate cuts by key central banks are further factors to monitor.
The next meeting is scheduled for 27 April.