KYIV (Reuters) – Ukraine’s central bank could start cutting its key rate by one to two percentage points in coming months, notes from the central bank’s committee for monetary policy showed on Monday.
The bank has kept its main rate unchanged at 25% since last summer, when it increased the rate to tame growing consumer prices fuelled by Russia’s war in Ukraine.
Recent economic and inflation trends offer grounds for cautious optimism, the central bank said, adding that the majority of members of its monetary policy committee assumed that rate cuts might start earlier than initially forecast.
“Most members of the committee consider it likely that the discount rate could be decreased by one to two percentage points, starting from July or from September,” said the statement summarising discussions at the central bank’s monetary policy meeting earlier this month.
At its latest monetary policy meeting on June 15, the central bank kept the rate unchanged.
Consumer price inflation has been slowing quicker than expected so far this year. It reached 15.3% in May year-on-year.
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The central bank said that stable international financial support, a continued increase in foreign currency reserves, and the lower-than-expected volume of interventions on the foreign exchange market indicated that a moderate reduction in the rate would not create risks for the exchange rate and price dynamics.
Central bank foreign currency reserves stood at an 11-year high of $37.32 billion at the start of June. Ukraine has received $22 billion in Western financial aid since the start of 2023, according to finance ministry data.
“The majority of the committee members expect that the discount rate will be at 20-21% at the end of the year,” the statement said.
(Reporting by Olena Harmash, Editing by Timothy Heritage)