The NBU increases prime rate by extra 0.5 ppt up to 8.5%

UKRAINE - In Brief 09 Sep 2021 by Dmytro Boyarchuk
The NBU Board increased the prime rate by an extra 0.5 ppt up to 8.5%. The decision was widely expected as the NBU itself mentioned a likely prime rate revision up to 8.5% if inflation trends remain strong. In the meantime, CPI was reported declining seasonally by 0.2% m/m in August amid eased food prices. However, in year-on-year terms, consumer inflation remains high at +10.2% y/y in August. Most likely, the NBU will not touch the prime rate this year unless more inflation surprises show up. Remarkably, the NBU announced a tightening of long-term refinancing support for the banking system, which is a curious move amid steady problems of budget deficit financing. Maybe it’s a sign that the budget deficit will be covered at the expense of inflationary tax collections. But that sounds too good to be true. Such fiscal wisdom is rare stuff among Ukrainian officials. The next meeting of the Board is scheduled for October 21, 2021.

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