The Board of the National Bank of Ukraine decided to set the discount rate at 16% from October 27, 2023, comparing it with the rate on overnight certificates of deposit (CD). Thus, the National Bank is modernizing its operational design of monetary policy according to the “lower bound” system, the National Bank of Ukraine informs.
Rates for other NBU operations with banks are set as follows: the rate for three-month GS will be equal to the “discount rate + 4 p.p.” (20%), and for refinancing loans – “discount rate + 6 percentage points.” (22%). Consequently, in fact, the levels of rates on NBU transactions with banks will remain unchanged.
Modernizing the operational design of monetary policy will strengthen the signaling role of the discount rate in conditions of a structural liquidity surplus. Such changes, in particular, will allow the NBU to keep short-term hryvnia interbank rates close to the discount rate. As a result, the NBU’s ability to influence the expectations of economic agents and the motives of their economic behavior will increase.
Keeping rates on NBU transactions with banks unchanged is consistent with the need to maintain the attractiveness of hryvnia instruments, which is important to ensure moderate inflation and exchange rate stability over the forecast horizon.
