The national Bank decided to raise interest rates to 17.5% to bring annual inflation to the target range in 2019.
The national Bank of Ukraine (NBU) has decided to raise the discount rate by 0.5 percentage points (PP) to 17.5% to bring inflation to the target range in 2019. The corresponding decision was approved by the NBU Board meeting Thursday, July 12, the press centre of the regulator.
In NBU believe that the reduction of inflation to the target could be under threat due to the actions of a number of factors – a further recovery in domestic demand, active labour migration, enhancing the risks of receiving the next IMF tranche and any related financing, the high inflationary expectations, the decline in investor interest in assets of developing countries.
“Tighter monetary policy to neutralize their influence and contribute to the reduction of inflation to 5.8% at the end of next year and to 5% in 2020,” – said the head of the NBU Yakov Smoliy.
Recall that the last time the national Bank raised the discount rate in early March of this year. Prior to this, on 25 January, the NBU increased the discount rate from 1.5% to 16% per annum.
Discount rate – the equivalent value of money in the economy. At this rate, the Bank provides funds to commercial banks who in turn lend to individuals and legal entities. Thus, the discount rate affects the cost of credit.
The rate increase shows the growth of inflation and falling economic growth in the country.
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