NBU changes assessment of medium-term nominal neutral interest rate from 8% to 7%
The National Bank of Ukraine (NBU), which last week lowered the refinancing rate from 13.5% to 11% per annum, changed the estimate of the medium-term nominal neutral interest rate in Ukraine from 8% to 7% per annum.
"This was the result of revaluation of the equilibrium real exchange rate of the hryvnia. Today, the structural characteristics of the Ukrainian economy are consistent with a stronger equilibrium rate than previously expected," the central bank's inflation report says.
According to the new estimates, the National Bank has the opportunity in the future to lower the refinancing rate more significantly than previously expected, to 7%.
"This level of interest rate will be in equilibrium for the Ukrainian economy, when inflation is at the target level, and GDP and employment are at the potential level," the NBU notes.