NBU may cut key policy rate amid impact of power outages on economic growth - Bloomberg

The National Bank of Ukraine is ready to cut its key policy rate for the third time in a row, taking into account the consequences of Russian attacks on the energy sector and their impact on economic growth, Bloomberg reports, UNN writes.

Details

"The National Bank of Ukraine will cut its key policy rate by 0.5 percentage point to 13% on Thursday, according to the median estimate of economists in a Bloomberg survey," the newspaper writes.

The decline in inflation and the prospect of international financial assistance, as indicated, have enabled the regulator to ease monetary policy since March.

However, as noted, after an additional rate cut next month, policymakers adjusted their economic growth forecasts for this year to 3% from 3.6% due to Russia's attacks on energy infrastructure.

"According to the minutes of the central bank's April meeting, seven out of 11 policymakers expected the base rate to be cut to 13% by the end of this year, while four expected a deeper cut," the publication points out.

At their April meeting, they discussed not only energy risks but also the prospect of inflation accelerating in the second half of the year. The latest data showed that last month's year-on-year price growth reached 3.3%, which is below the projected 8.2% for 2024.

Mykhailo Demkiv, an analyst at Kyiv-based investment company ICU, believes that due to lower-than-expected inflation, the central bank may face pressure to cut interest rates further this year.

"The central bank may stick to a 50 basis point rate cut in June," he said.

Recall

Despite the war, Ukraine's economy is recovering, and in the first quarter of this year, real GDP continued to grow. At the same time, due to Russian shelling of critical infrastructure, the economic growth forecast for this year has been reduced from 3.6% to 3%.