Banks are typically unable to adjust their lending rates swiftly in response to policy signals until they are able to adjust on the cost side by repricing the deposits in the next cycle. Third, and importantly, monetary transmission is also impeded because of large government borrowings and illiquid bond markets. 32.
Taking into account the risks outlined above, high uncertainty, and a significant amount of expected budget expenditures, maintaining exchange rate sustainability amid a pursuit of currency liberalization plans will require the NBU to continue to take a monetary policy approach that makes hryvnia-denominated savings highly attractive. With this in mind, the NBU Board decided to keep the key policy rate at 25%.