- Decision
- Raise
- Rate change
- 50 bps
- key policy rate
- 16.5%
The National Bank of Ukraine (NBU) raised its key policy rate by 50 basis points to 16.5% in October, citing sharply stronger price pressures and worsening inflation expectations, following a 50-basis-point cut to 15% in January and matching increases in July and September. The NBU raised its inflation forecast for 2026 to 12.5%, reflecting higher fuel costs, Russian attacks on production and logistics, and expanded fiscal stimulus. It expects inflation to resume slowing in 2027 and reach the 5% target in 2028. The central bank lowered its economic forecast to a 0.4% contraction in 2026 as attacks damaged productive capacity, and expects only a slow recovery thereafter. Household investments in hryvnia deposits and domestic government securities continued to grow. Foreign-exchange market pressure increased as exports declined and expectations deteriorated, while international financial assistance remained critical to macrofinancial stability. The war in the Middle East has raised energy prices, intensifying inflation pressures and constraining economic growth. The NBU projects keeping the policy rate at its current level until the second quarter of 2027, but signalled flexibility in responding to both persistent price pressures and the potential effects of weaker economic activity.
Rate evolution
Over the period, the National Bank of Ukraine held its key policy rate at 15.5% through 2025, cut it by 50 basis points to 15% in January 2026, paused, and subsequently raised it in two 50-basis-point steps to 16%. Through most of 2025, it kept a tight stance to support FX market sustainability and keep inflation expectations in check as inflation, peaking in May and then slowing, remained above forecast at times and underlying pressures from wages, labor shortages, energy costs, demand and war-related disruption persisted. Late in 2025, the risk balance turned more hawkish, with greater emphasis on energy shortages, larger budgetary needs and uncertainty over external assistance, even as harvests and official financing supported disinflation and reserves.
After the January cut, the NBU held at 15% as inflation rose on energy and fuel prices linked to the war in the Middle East, hryvnia weakness and faster wage growth, before raising it to 15.5% as persistent pressures from logistics, wage and energy costs continued despite increased raw food supply. Most recently, it raised the key policy rate to 16% in view of persistent underlying price pressures, second-round effects from supply shocks and higher medium-term inflation risks, after consumer inflation accelerated to 8.1% year on year in August, primarily on a greater-than-expected rise in fuel prices amid escalation in the Middle East and faster increases in administered tariffs due largely to Russia’s attacks on critical infrastructure. The increase aims to support the attractiveness of hryvnia assets, maintain FX market sustainability, keep inflation expectations in check and return inflation toward the 5% target, while the NBU said it stood ready to tighten further if risks intensified or consider easing if the security situation noticeably weakened consumer demand and the labor market.