KIEV, Aug. 9 – The National Bank of Ukraine on Monday cut its key interest rate for the third time since June, citing lower-than-expected inflation and a greater influx of hard currency into the country.

The NBU cut the discount rate, the rate at which it lends money to commercial banks, to 7.75% from 8.5%, the bank said in a statement. The new rate will be in effect from Tuesday.

“The NBU board turns attention to improving macroeconomic situation,” the bank said in the statement posted on its Website.

The NBU started its rate cutting cycle on June 8, by lowering the rate to 9.5% from 10.25%, and then cut the rate again on July 8, to 8.5% from 9.5%.

The rate cut comes as the economy has been already growing almost twice as fast as the government had expected, buoyed by stronger prices of steel, Ukraine’s main exports.

The economy expanded 6.3% on the year in January through June, according to Prime Minister Mykola Azarov. The government earlier forecast the economy would expand 3.7% on the year in 2010.

The figures suggest a sharp rebound from a 15.1% on-year economic contraction recorded in 2009.

The lower interest rates make easier for businesses to obtain loans and that may further boost economic expansion in Ukraine, but may also accelerate inflation.

The NBU said that it was not concerned about possible increase of inflation as prices have been growing modestly since the beginning of the year.

Consumer prices rose 6.8% between July and July 2009, which compares with 15.5% hike between July 2009 and July 2008, according to the NBU.

Also, Ukraine reported a $4.4 billion surplus in balance of payment in January through June, underscoring growing influx of foreign currency due to robust exports and investments, according to the NBU.

The positive economic data comes as the International Monetary Fund has approved $15.1 billion 30-month loan to Ukraine late July to support economic reform program.

The IMF has immediately disbursed $1.89 billion to Ukraine after approving the loan, and will decide in November whether to disburse the second installment by the end of the year.

The government forecast the economy to expand to almost $135.4 billion in 2010, up from $114.3 billion in 2009, according to 2010 budget data.

Ukraine’s economic growth may hit 3.3% in 2010 and may further speed up to 4.5% in 2011, according to Moody's Investors Service.

Moody's also forecast 11.4% inflation in Ukraine in 2010, and 11% in 2011.

The World Bank in July revised upwards Ukraine's economic growth forecast in 2010 to 3.5% from 2.5%, and in 2011 to 4% from 3.5%. (tl/ez)