Ukraine’s central bank cut its benchmark rate for the first time in more than a year, reducing it to the lowest since 2004 after the country recorded deflation for a seventh month.
The Natsionalnyi Bank Ukrainy in Kiev cut the discount rate to 7 percent, effective June 10, from 7.5 percent yesterday, according to a statement on its website today. That’s the first change since March 2012.
Ukraine’s economy shrank 1.3 percent in the first quarter from a year earlier as demand waned for the country’s exports such as steel. Consumer prices fell 0.4 percent in May on an annual basis, the state statistics committee said yesterday.
“The rate cut will be positively accepted by the market and will boost lending,” Governor Ihor Sorkin said in the statement. “Together with other measures taken by the central bank and the government, it will promote economic activity in the country and will help the stability of the banking system.”
Neighboring Belarus yesterday cut its benchmark interest rate to 23.5 percent in its fourth reduction this year and Serbia’s central bank unexpectedly lowered its benchmark to 11 percent. Elsewhere in eastern Europe, Poland and Hungary cut rates to record lows in the past two weeks, while the Czech central bank is considering currency sales with rates at effectively zero.
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