Ukraine Central Bank Cuts Interest Rate

KIEV, Ukraine—Ukraine's central bank lowered its key interest rate to 27% from 30%, citing reduced inflation risks.

The National Bank said slowing inflation meant "it is possible to start a softening of monetary-credit policy," though the bank added it would have to keep monetary policy relatively tight to keep inflation slowing.

Ukraine's central bank raised the key interest rate to 30% in March from 19.5% following a sharp decline in the value of the national currency, which caused prices to skyrocket. Yearly inflation peaked in April at more than 60%, though the National Bank said in June that it expected year-end inflation to be 48%.

The rate cut is "the beginning of gradual monetary policy normalization after the bank was forced to raise rates aggressively to stabilize the hryvnia," said Piotr Matys, analyst at Rabobank.

Earlier Thursday, Ukraine's government said it had reached a debt-relief deal with private creditors that included a 20% write-down on the face value of their Ukrainian bonds.

"The good news keeps on coming in Ukraine," said Timothy Ash, emerging markets analyst at Nomura. The central bank is "obviously trying to reinforce the local view that this debt deal is good news."

Write to Chiara Albanese at chiara.albanese@wsj.com

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(END) Dow Jones Newswires

August 27, 2015 09:05 ET (13:05 GMT)

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