The reduction in the key policy rate of the National Bank of Ukraine (NBU) in September from 22% to 20% per annum was supported by nine members of the monetary policy committee, two spoke in favor of a more significant reduction - to 19%, the regulator reported on the results of committee discussions on September 13.

“Such a step will support economic recovery. As current trends indicate, the gradual easing of interest rate policy helps to maintain investors’ interest in fixing profitability in fixed-term instruments, both deposits and government bonds,” the majority of the committee members believe.

In their opinion, a moderate reduction in the key policy rate by 2 percentage points will not create a threat to the attractiveness of hryvnia savings, therefore, to exchange rate stability, a sustainable reduction in inflation and the further implementation of the strategy for easing foreign exchange restrictions and will support economic recovery

At the same time, two members of the commission turned out to be more radical in their visions and supported reducing the rate to 19% already in September.

“The actual macroeconomic situation turned out to be significantly better than expected at the beginning of this year. The NBU’s measures to increase the attractiveness of hryvnia assets worked, their effects continue, so the NBU can act more boldly,” the central bank said.

They believe that the slowdown in inflation faster than the NBU forecast (to 8.6% in August) indicates a chronic revaluation of inflation risks.

“A more significant reduction in the rate will not pose a threat to the attractiveness of hryvnia savings, because the current return on hryvnia assets more than protects savings from inflationary depreciation,” the National Bank said.

In addition, it is reported that the majority of committee members expect the refinancing rate to be reduced to 18% by the end of the year, but several of their colleagues again consider it possible to lower it to 16-17% per annum.