NBU lowers discount rate by 75 bps to 7.75%

Yesterday the National Bank of Ukraine (NBU) lowered its discount rate, for the third time this year, to 7.75% from 8.5% and 12% at the start of 2010. Mykyta Mykhaylychenko: We see this move as symbolic and having no material impact on the market. This year, as before the crisis, the NBU’s refinancing activities have been dormant (UAH 3.9 bln YTD vs. UAH 156 bln from selling CDs to banks and other similar operations directed at withdrawals from the market). Growth in reserve money this year (+14.8% YTD, +18.3% y-o-y in July) was primarily fueled by buying excessive foreign currency on the local forex market (net USD 3.4 bln during 7M10). However, the move does reflect improvement in the economic situation in Ukraine: recovery in real growth, BoP improvement, and slowing inflation.