Seven out of 11 members of the Monetary Policy Committee (MPC) of the National Bank of Ukraine (NBU) at a meeting on March 5 supported the increase in the discount rate from 14.5% to 15.5% per annum from March 7, while four were for its increase by 0.5 percentage points (p.p.), according to the results of the committee’s discussion published on Monday.
“The NBU should act decisively and confirm its commitment to the mandate to ensure price stability in order to maintain confidence in monetary policy. The increase in the discount rate by 1 percentage point in March corresponds to the trajectory of the baseline scenario of the January macro forecast and… the expectations of the majority of financial market participants…,” the Monetary Policy Committee majority said.
According to the minutes, the MPC members believe that the set of measures taken by the NBU in March will be sufficient to overcome the price surge, reverse the inflation trend and enable the National Bank to return to the cycle of easing interest rate policy in 2025.
“However, the majority of the MPC members also believe that, given the upwardly shifted balance of inflation risks, the NBU should be prepared for a period of longer holding the policy rate at the current level or even further tightening of interest rate policy in the event of the realization or intensification of risks to price dynamics and inflation expectations,” the publication said.