The National Bank of Ukraine (NBU) published an account of its advisory Monetary Policy Committee’s (MPC) Oct. 28 discussion, showing disagreement over how to address rising inflation as economic activity weakens. Eight of 11 members supported raising the key policy rate from 16% to 16.5% to contain price pressures and worsening inflation expectations. Three favored keeping it unchanged to preserve support for lending and economic activity.
Annual consumer inflation reached 10% in September, above the NBU’s July forecast of 8.4%, while core inflation rose to 8.8%. Both measures continued rising in October, according to NBU estimates. Higher fuel costs and Russian attacks on production and logistics infrastructure broadened price pressures despite a decline in real gross domestic product in the third quarter. Members supporting an increase argued that tighter policy would reduce the risk of inflation expectations becoming unanchored and maintain the appeal of hryvnia savings amid growing foreign exchange pressure.
The three members favoring a hold considered previous tightening sufficient and argued that weaker business activity and labor demand could ease inflation faster than forecast. Further increases in deposit rates remained possible as earlier policy moves continued to feed through. No member saw room for rate cuts in the coming months, and most saw risks that the policy rate path would be higher than currently forecast. Nevertheless, members expected gradual easing to around 14% in 2027 as inflation slowed and risks to inflation expectations diminished.