The National Bank of Ukraine is planning to lower its discount rate to 7% by the end of 2020, according to a press release by the National Bank.
“We expect that most likely the discount rate will lower during the first half of the current year. This will have the effect of lowering credit costs for business and the population, and will stimulate business activity,” noted the National Bank.
On January 30, the National Bank lowered the discount rate by 2.5%, from 13.5% to 11%. Further cuts of 4% over the course of the year will be necessary to bring the discount rate in line with the forecasted target.
The discount rate is one of the fundamental indicators of the economy, which is expressed as the percent at which the National Bank lends to banks, and the lowest rate a commercial bank can offer clients. Higher discount rates generally have the effect of encouraging savings, while lowering discount rates are expected to have the opposite effect of stimulating spending.