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.
National Bank of Ukraine Raises Key Policy Rate by 50 Basis Points to 16.5%
The National Bank of Ukraine raised its key policy rate by 50 basis points to 16.5% in October amid stronger price pressures and worsening inflation expectations, projecting no change until the second quarter of 2027. It raised its 2026 inflation forecast to 12.5% and lowered its economic forecast to a 0.4% contraction.