The reduction of the key policy rate from 14.5% to 13.5% at the meeting of the Monetary Policy Committee (MPC) of the National Bank of Ukraine on April 24 was supported by eight of its members, while three suggested lowering it to 13%, according to the NBU's published results of the MPC members' discussion on Monday.

"All MPC members said they see room for further cuts to the key policy rate in 2024, although opinions differed on the pace of the interest rate easing. Seven discussion participants said they expect the key policy rate to decrease to 13% in 2024… By contrast, four MPC members said that such a level of the key policy rate would be too high, considering the current and expected inflation dynamics," the National Bank said.

Proponents of more decisive actions are convinced that the NBU will find evidence of sufficient resilience of inflation expectations and other favorable developments and will be able to speed up the lowering of the key policy rate to 11.5%–12% by the end of the year.

In the opinion of their more cautious colleagues, the NBU should proceed with caution, taking into account planned FX liberalization measures, the projected acceleration of inflation in H2 2024, and a potential deterioration of economic agents’ expectation.

"Risks associated with the energy sector and the financing of significant budgetary needs also persist," the NBU said, listing their other arguments.

All discussion participants agreed that elevated uncertainty makes it difficult to forecast the level of the key policy rate even through the end of this year, let alone the years that follow.

According to MPC members, the NBU should stand ready to flexibly adapt its policy should considerable shifts occur in current macroeconomic developments and in the balance of risks to inflation and exchange rate dynamics.

"The NBU should focus more on the macrofinancial trends that are supported by data, and less on technical assumptions about security risk duration that are revised on a regular basis," they said.