NBU unexpectedly cuts key rate by 50bp to 14.5%, slightly modifies operational design
The NBU resumed its rate-cutting cycle after taking a short pause in January 2023, making the move much earlier than the mid-year time frame indicated by its latest forward guidance. The Bank cut its key rate by 50bp to 14.5% p.a., on top of 1,000bp of cuts in 2023, justifying the decision by the continued deceleration in headline inflation, F/X market stability, and improved inflationary expectations. In addition, the central bank modified its operational design by narrowing the interest rate corridor by 100bp as it cut the rate on refinancing loans by 150bp to 19.5%. The Bank left the rate on overnight certificates of deposit (CD) equaling the key rate but slashed that on 3-month CDs by 150bp to 17.5%. It also narrowed the base for calculating the limit on banks’ investments into this instrument to 12 preceding months from the period since Apr. 4, 2023 (this amendment will take effect on Apr. 19).