Ukraine Cuts Interest Rate Again After Securing Vital US Aid

(Bloomberg) -- Ukraine’s central bank lowered borrowing costs more than expected as inflation continued to slow and the authorities in Kyiv hailed billions of dollars in foreign aid to help counter Russia’s invasion.

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The National Bank of Ukraine cut the key policy rate by a full percentage point to 13.5% on Thursday. One analyst in a Bloomberg survey expected the move, while most economists expected a half-point reduction.

“The continuation of international financial support and measures to strengthen the resilience of public finances will secure further macrofinancial stability necessary for sustainable economic recovery,” the central bank said in a statement.

Policymakers unexpectedly resumed easing last month, highlighting progress in taming price growth and “positive developments” in prospects for foreign aid after the war entered its third year. President Joe Biden signed off on a package that included $61 billion in aid to Ukraine on Wednesday, saying assistance would begin to move within “hours.”

Read more: Biden Signs Aid Bill, Orders Ukraine Help to Flow Within Hours

The government is likely to receive a total of $38 billion in financial assistance this year, boosting Ukraine’s international reserves to $43.4 billion by year-end, compared with an earlier forecast of $40.4 billion, according to the central bank. Officials should be able to ease capital controls further in the coming weeks, the bank said.

Policymakers cut their forecast for consumer inflation to 8.2% from 8.6% for this year, while they also downgraded their estimate for economic growth to 3% from 3.6% due to Russian attacks on the country’s energy facilities.

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