Tuesday, August 13, 2013

Ukraine cuts rate 50 bps, improved inflation expectations

    (Updated with corrected rate cut amount)

    Ukraine's central bank cut its benchmark discount rate by 50 basis points to 6.50 percent to "promote sustained economic growth" amid improved expectations for inflation.
    The National Bank of Ukraine, which also cut its rate in June, said a survey in the second quarter showed that inflationary expectations reached an all-time low since 2006 and banks' resource base had expanded.
    Ukraine's headline inflation rate was zero in July, up from a fall in inflation of 0.4 percent in June. Ukraine has been suffering from deflation for the last 14 months
    The central bank has now cut rates by a total of 200 basis points this year following the 50 basis point reduction in June.
    The bank said funding in the national currency was the main contributor to growth in deposits and in the first seven months of the year deposits had expanded by 17.8 percent compared with a 0.6 percent decline in foreign currency deposits.
    It also said interest rates on loans had been on a gradual downward trend with the average weighted interest rate on loans down to 15.7 percent in July from 17.6 percent in December 2012.
    In the first quarter, Ukraine's economy expanded by 0.6 percent from the previous quarter for annual contraction of 1.1 percent.



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