The National Bank of Ukraine (NBU) has decided to keep the key policy rate at 25% per annum and, as market participants expected, and to take a number of additional measures to spur competition among the banks for retail term deposits by cutting the interest rate on overnight certificates of deposit, to 20% from 23%.

"With a view to bringing down inflation further, protecting hryvnia savings from being eroded away by inflation, and maintaining a stable exchange rate, the NBU Board decided to keep the key policy rate at 25%. It also decided to introduce additional measures to boost competition among the banks for household time deposits," the NBU said on Thursday.

The National Bank said that Inflation in Ukraine decelerated for the second month in a row, to 24.9% yoy in February. The decline in inflation started earlier and was faster than forecast by the NBU. Inflation will continue to slow, including due to the NBU's measures to improve the attractiveness of hryvnia assets and support exchange rate stability.

"The attractiveness of hryvnia term deposits improving further on the back of lower pressures in the cash segment of the FX market will prompt depositors to increase their savings in the domestic currency. This will make the FX market more resilient and protect international reserves, supporting an improvement in exchange rate and inflation expectations going forward," the NBU said.

The Central Bank added that a slowdown in global inflation, including the decline in energy prices, and the high base effect of the first year of the full-scale war will also contribute to a drop in the inflationary pressure. Relatively moderate consumer demand will also curb price growth.