The National Bank of Ukraine (NBU) has recorded a halt in the trend of decreasing interest rates on deposits and expects their further increase following the latest monetary policy decisions.
This is how NBU Governor Andriy Pyshnyy commented on the relevant question from Ukrinform at a monetary briefing.
“The downward trend in deposit interest rates has stopped. Moreover, in January, we recorded a slight, but significant increase in interest rates, and we believe that it should be more significant. We need to maintain this trend,” Pyshnyy said.
He noted that by raising the key policy rate and revising the parameters of the operational design, the NBU is creating conditions that will allow banks to offer more competitive interest rates to depositors.
According to the regulator’s decision, the spread between the key policy rate and the rate on three-month certificates of deposit will increase by 1 p.p. (to 19%), and the spread between the key policy rate and the rate on overnight loans will also increase by 1 p.p. (to 19.5%).
Depending on the success of the last 12 months of increasing the portfolio of hryvnia deposits of households with a maturity of more than three months (the multiplier is increased from 3 to 3.5), banks will also be able to place funds in three-month certificates of deposit,
The updated parameters will take effect on April 4.
“We have time to prepare, and we hope that the appropriate impetus provided by the NBU with this decision will be properly perceived,” the NBU Governor emphasized.
He expressed hope that Ukrainians’ bank deposits will continue to be an attractive way to keep their savings.
According to Pyshnyy, hryvnia-denominated assets in the form of domestic government bonds also remain attractive, as evidenced by the growth in demand for them among individuals in January.
“We expect that the decisions announced today will trigger the appropriate transmission, and Ukrainian citizens will receive an adequate interest rate offer on deposits with a maturity of more than 93 days. The NBU has already created the necessary incentives for this by changing the operational design,” the NBU Governor added.
In turn, Deputy NBU Governor Sergiy Nikolaychuk said that since the beginning of the year, the share of households’ hryvnia term deposits has increased by about 1.5%. The share of term deposits in the total volume of retail deposits in hryvnia increased by 0.6 p.p. to 34.2%.
“We expect that our current measures will only strengthen this trend,” Nikolaychuk added.
As Ukrinform reported, on March 6, the National Bank raised the key policy rate to 15.5%.
Photo credit: NBU
