OREANDA-NEWS. The Board of the National Bank of Ukraine adopted the decision to cut the discount rate by 0.5 percentage point to 7% per annum,effective from 10 June 2013.

Seeking to reinforce already prevailing positive trends in the monetary sphere, the National Bank of Ukraine has taken this step, thus providing impetus to economic growth. This year has seen some developments in the monetary sphere. In particular, the CPI inflation rate has remained at the level close to zero; market expectations have brightened up; the cost of funds has been on a downward trend; the banking sector has witnessed steady deposit growth, with funds in the national currency accounting for most of the growth.

"I am convinced that the decision to cut the discount rate will be welcomed by the market. It is designed to boost lending. Together with other measures taken by the National Bank of Ukraine and the Government, it will spur economic activity in the country and will help ensure the stability of the banking system," said Governor of the National Bank of Ukraine Ihor Sorkin.

The National Bank of Ukraine last reduced its benchmark rate from 7.75% to 7.5% on 21 March 2012. Since May, the cost of major refinancing transactions (weekly tenders for the term of up to 14 days) has been set close to the discount rate.

In accordance with the Law of Ukraine "On the National Bank of Ukraine", the discount rate of the National Bank of Ukraine” is a monetary instrument with the help whereof the National Bank of Ukraine sets for banks and other money market participants the range mark with regard to the costs of raised and placed monetary funds.

The discount rate is the base rate for National Bank of Ukraine’s other rates. The central bank uses the discount rate as a means of implementation of the monetary policy. It is a monetary instrument whereby the National Bank of Ukraine sets a price benchmark of money.