Interest Rate Cuts in Ukraine and Serbia – Currency Thoughts
Interest Rate Cuts in Ukraine and Serbia
June 13, 2024
The National Bank of Ukraine policy interest rate was lowered to 13.0% from 13.5%. In the early months after Russia first invaded Ukraine in February 2022, the interest rate had been catapulted from 10% to 25% and then kept at that level from June 2022 until a reduction in July 2023. Ten percentage points of reduction were done in the second half of 2023, and today’s announcement brings the cumulative decline during the first half of this year to another two percentage points. Today easing was prompted by the “balance of price risks, still subdued inflation, and ongoing improvement in inflation expectations.” CPI inflation in Ukraine has retreated from 26.6% at end-2022 to a 38-month low of 3.2% as of April, and May’s reading of 3.3% was also well within the 4-6% target range.
Officials at the National Bank of Serbia today voted to keep their key interest rate. Such was the first reduction since December 2020 and was a move from 6.5%, the level maintained over the prior twelve months, to 6.25%. Consumer price inflation in Serbia decelerated by half a percentage point to a 33-month low in May of 4.5%. That happens to also be the upper end of a target range of 1.5-4.5%. In a released statement, the Executive Board “expects inflation to recede further, staying within the target band in the medium term and hovering around the 3% target as of early 2025. Such inflation profile will be supported by the still restrictive monetary conditions, reduced global inflationary pressures, and lower inflation expectations of market agents.”
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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