The National Bank of Ukraine raised the discount rate from March 6 to 15.5% per annum, which is 1% higher than the previous rate. Executive Director of the Economic Discussion Club Oleg Pendzin commented to UNN that the increase in the discount rate is due to inflation control, so the NBU is implementing such precautionary measures to prevent inflation from becoming dangerous for the economy.
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The expert noted that the discount rate is a mechanism for controlling inflation.
How does the discount rate control inflation? The higher the discount rate, the more expensive the loan. The more expensive the loan, the less business takes out that loan. The less business takes loans, the lower the demand in the market. The lower the demand in the market, the lower the prices, because prices are formed according to the relationship between supply and demand. This is how the discount rate works. But on the other hand, the discount rate restrains economic growth. Because we know very well that economic growth is directly related to attracting credit resources. The National Bank is responsible for inflation
He noted that the effect of the discount rate is related to the fact that in January-February inflation was 12.9%, with a baseline scenario of 9%, which was approved by the NBU.
I think inflation will accelerate further in February. I think it will be over 13%. What does this mean? It means that the National Bank needs to implement precautionary measures to prevent inflation from becoming dangerous for the economy. That’s what he is doing. By the way, this is not the first increase in the discount rate. It was 12.5%, then 13.5%, then 14%, now it is 15.5%