The National Bank Cuts Discount Rate To 8%

The National Bank of Ukraine (NBU) has announced plans to reduce its discount rate by 0.5% to 8% starting from June 1, 2007. Polina Khomenko/Oleksandr Klymchuk: This is the second time the NBU has lowered its discount rate over the last 12 months (the last one was on June 10, 2006) and the move signals that further expansionary monetary policy could be on the horizon. The moderate inflation level allows the NBU to lower the rate in an attempt to stimulate economic activity. The rate cut will result in a decrease of coupon payments of two sovereign local “VAT” bond issues (as their coupons are linked to a weighted average NBU discound rate), it will also decrease the coupon rate of Kyiv’s local bond issue from 12.75% to 12%.