NBU monetary policy committee in its opinion on key policy rate dynamics in 2024 divides as 7:4 in favor of reducing it by another 0.5-1 p.p.

Seven members of the Monetary Policy Committee of the National Bank of Ukraine (NBU) see the potential to reduce the key policy rate by another 0.5-1 percentage point (p.p.), to a level of 12.5-12% per annum by the end of 2024, while four believe that the potential for its reduction has already been exhausted, according to the results of the June 12 committee discussion published on Monday.

“In their opinion, the risks for the inflation forecast are quite balanced. There is also reason to expect sufficient amounts of external financing both for this and next years. Taking this into account, they believe that the NBU will be able to reduce the rate to at least 12-12.5% until the end of this year,” the press release explains.

Their four opponents, who believe that the rate should be kept at the current level of 13% per annum until the end of the year, are of the opinion that the balance of risks to inflation dynamics is slightly shifted upward, taking into account significant budget needs, the expected pass-through effects from the weakening of the hryvnia on inflation and the likely worsening expectations due to its acceleration.

“At the same time, all participants in the discussion agreed that, given the high level of uncertainty, the NBU should be ready to continue to flexibly adapt monetary policy in the event of changes in the balance of risks for inflation and the foreign exchange market,” the release says.

It also states that when updating the July macro forecast, the National Bank will be able to better assess changes in the balance of risks and the prospects for further macroeconomic development. In this case, the regulator will base its decision on a wider information volume and detailed calculations.

As reported, the board of the National Bank decided to reduce the rate by 0.5 percentage points – to 13% per annum from June 14, 2024.