Business news from Ukraine

Business news from Ukraine

RAISING KEY POLICY TO 25% WILL STRENGTHEN HRYVNIA EXCHANGE RATE

The National Bank’s raising the key policy rate to 25% per annum will allow strengthening the hryvnia exchange rate and raising hryvnia deposit rates, some experts believe, but some of them point to possible additional shocks for the economy.
“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.
A sharp increase in the key policy rate will help avoid imbalances that could turn into powerful crisis-forming mechanisms, the banker believes.
According to Blinov, it is possible to reduce the rate if Ukraine wins and under the terms of strengthened international assistance.
Investment market expert Ivan Uhlianytsia also notes in a commentary to the agency that such movements will not harm the economy, but will allow to streamline its exchange rate and price imbalances, slow them down a bit.
“This is an attempt to retain the hryvnia a little, reduce the motivation to go into the currency and goods, bring it closer to reality,” the expert points out.
He predicts that as a result of such a step, the official and non-cash dollar exchange rate will move closer to UAH 32-33/$1, which will reduce the consumption of reserves and reduce “foreign exchange tourism,” which, according to the expert, the NBU only encouraged before that, releasing the cash exchange rate, but keeping the non-cash one at UAH 29.25/$1.
Mykhailo Demkiv, a financial analyst at ICU Group, also notes in a commentary to the agency that with this step, the central bank is trying to stimulate savings instead of converting them into currency.
In addition, he expects the growth of government bonds yield rates, and the next auction, which will take place on June 7, will be an important signal. The rise in the cost of borrowing for the Ministry of Finance is one of the possible negative effects of such a decision, Demkiv notes.
“Refinancing will also rise in price, banks will take it very carefully, only when absolutely necessary. After some time, the banks will be forced to increase rates on hryvnia deposits,” he said.

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