The National Bank of Ukraine (NBU) from April 22 has decided to decrease the refinancing rate to 19% per annum from current 22% per annum set since September 25, 2015 when the central bank decreased it from 27% per annum.
The NBU said in a press release that this is outlined in NBU order No. 278 dated April 21, 2016 on regulating the monetary and credit market.
"This has been realized thanks to large weakening of price stability risks," the NBU said.
The central bank said that higher inflation risks compared to the targeted indicators that hindered the mitigation of the monetary policy in the first quarter have significantly weakened.
"In particular, political tension decreased thanks to the formation of the new government, and external risks – thanks to resumption of transit of Ukrainian goods across Russia and the gradual growth of prices on Ukrainian exported goods. The key risk today remains delaying Ukraine's cooperation with the IMF (International Monetary Fund). The eagerness of the new government to continue reforms is crucial," the central bank said.
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The NBU will continue to relax monetary policy if risks decrease more.
The central bank projects Ukraine's real GDP growth at 1.1% in 2016 and 3% in 2017.
The deficit forecast of the current accounts changed little compared to the previous assessments ($2.3 billion or 2.7% of GDP in 2016 and $1.8 billion or 1.9% of GDP in 2017).