KYIV, June 2 – The National Bank of Ukraine (NBU) raised the key policy rate from 10% to 25% per annum, according to a press release on the NBU website.

The Board of the National Bank of Ukraine has decided to raise the key policy rate to 25% per annum. Along with other measures, this resolute step aims to protect households’ income and savings in the hryvnia, raise the attractiveness of hryvnia assets, reduce the pressure on the foreign exchange market, and thus enhance the NBU's capability to maintain the stability of the exchange rate and restrain inflation processes during the war," the NBU said.

According to the report, a decisive rise in the key policy rate will spur investors’ interest in hryvnia assets, while also easing pressures on international reserves and reining in inflation.
The move to hike the rate to 25% will allow strengthening the hryvnia exchange rate and raising hryvnia deposit rates, analysts said.

Good news for the hryvnia exchange rate and depositors - deposit rates will quickly catch up with inflation. The inflationary reality is already 20%+, it cannot be ignored forever. And it will be with us for a long time," the head of the analytical department of Alfa-Bank Ukraine, Oleksiy Blinov, said.

The NBU believes that a slight increase in the key policy rate would have had no significant influence on the financial and economic system. The first reason for this is that the monetary transmission mechanism has only a limited effect in wartime. Second, this would have resulted in expectations of further increases in the key policy rate and, consequently, depositors taking a wait-and-see approach and, investors having weak interest in hryvnia assets. (om/ez)