Ukrainian Central Bank Delays Monetary Policy Tightening
The National Bank of Ukraine has halted its downward interest rate cycle following three interest rate cuts, as accelerating inflation forced the country’s monetary strategists to announce that monetary policy easing may resume next year. Ukrainian central bankers kept the base rate at 13% at their meeting on July 25 – a decision anticipated by six out of the nine economists surveyed by Bloomberg. Three had expected a rate cut of at least 25 basis points.
Ukrainian Central Bank Lowers Interest Rates
Following a surge in Ukrainian land prices, the Ukrainian monetary strategists have lowered the base interest rate by a total of 2% over their last three official meetings, with most of them hinting in June for more possible reductions. However, price growth in June accelerated to its highest level since December 2023, while the depreciation of the hryvnia in the face of rising budget expenditures increased business costs and pumped up inflation.
“The baseline forecast scenario is that the National Bank of Ukraine will only begin to restore its downward interest rate cycle at the beginning of…”
The Central Bank’s Decision on Credit Costs
In an official statement, bankers have announced their decision to maintain the price of credit costs in 2025. This decision was made to ensure stability in the currency market and to bring inflation closer to the target of 5% annually. The institution also promises to maintain an “active presence” in the currency market.
Inflation Forecast
Official bank representatives have raised their inflation forecast at the end of the year to 8.5% from the previous 8.2%. They expect the price increase to slow down to 6.6% in 2025. Price pressure is expected to persist in the coming months, fueled by…
The Impact of Rising Costs on Business in Ukraine
The National Bank of Ukraine has highlighted several factors contributing to the increase in business costs in the country. These include higher excise taxes, the diminishing effect of last year’s bumper harvest, and the negative impact of this year’s grain yield being affected by summer drought. The initial inflation estimates in July confirm that further acceleration is expected.
Despite acknowledging a slowdown in economic growth in the first half of 2024 due to Russian attacks on energy infrastructure, monetary strategists have revised their forecasts.
Boosting Economic Growth in Eastern Europe
Experts are predicting a significant increase in GDP growth in Eastern Europe, from 3% to 3.7% annually. This boost is attributed to businesses adapting to the new electricity supply regime, which has allowed for more efficient operations.
Financial Strategists Optimistic About Economic Expansion
Financial strategists have raised their forecasts for economic growth due to expected fiscal stimulus expansions and measures to support the recovery of the electricity supply after disruptions caused by Russian forces. The gradual normalization of economic activity, along with the implementation of more generous fiscal policies and the expansion of export routes, are contributing to this positive outlook.
Boosting Economic Growth through Foreign Trade
Bankers are pointing out that focusing on foreign trade will help accelerate the growth of the real GDP to 4%-5% by 2025-2026. By expanding international trade relationships and increasing exports, countries can stimulate economic growth and create new opportunities for businesses.