Ukraine’s National Bank changes estimation of medium-term nominal neutral interest rate

Source : 112 Ukraine

Last week, it lowered the discount rate from 13.5% to 11%
12:14, 7 February 2020

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National Bank of Ukraine (NBU) changed its estimation of the medium-term nominal neutral interest rate in Ukraine from 8% to 7% per annum, Interfax reports.

"This was the result of a revaluation of the equilibrium real exchange rate of hryvnia. Today, the structural characteristics of the Ukrainian economy are in line with a stronger equilibrium exchange rate than it was previously expected," stated in the inflation report, which was published on Friday.

According to new estimates, the National Bank has the potential to reduce the discount rate more significantly than previously expected - up to 7%.

Related: Ukraine's National Bank lowers discount rate from 13.5% to 11%

"Such a level of interest rate will be equilibrium for the Ukrainian economy when inflation is at the level of the target and GDP and employment are at the potential level," the NBU stated.

As we reported earlier, in 2019, the total national and government-guaranteed foreign currency debt of Ukraine increased by 7.71% and reached 84,36 billion dollars at the end of the year.

However, the national currency debt decreased by 6,8 billion dollars (7.71%) to the level of 80,8 billion dollars.

Related: National Bank of Ukraine replenished foreign currency reserves by $ 7,93 billion in 2019

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