In a speech at the National Bank of Ukraine’s workshop on monetary policy in emerging markets, Governor Andriy Pyshnyy reviewed how Ukraine’s inflation-targeting framework has been adapted during wartime and set out the approach for eventually returning to “classical” inflation targeting with a floating exchange rate once economic conditions normalize. Pyshnyy traced the regime’s evolution from its 2015 launch, when inflation exceeded 50%, through a period of tight policy aimed at building credibility, to the full-scale invasion in 2022, when the NBU fixed the exchange rate and imposed tight foreign exchange restrictions to contain panic and protect financial stability. He described the subsequent step-by-step unwinding of crisis measures, including actions to restore monetary transmission, cooperation with the government and the resumption of the internal debt market, a decision not to use monetary financing, and the publication of strategic documents explaining the path back to more normal policy settings. The speech also reiterated that the NBU moved in 2023 to managed exchange rate flexibility and began foreign exchange liberalization, and introduced flexible inflation targeting in 2024, with policy increasingly relying on an integrated mix of interest rates, FX interventions, and capital flow restrictions. Looking ahead, the NBU’s Strategy and Monetary Policy Guidelines envisage a gradual return to classical inflation targeting with a floating exchange rate after broad-based normalization of the economy. Pyshnyy indicated the NBU intends to avoid reacting to short-term shocks when expectations are stable, while responding decisively when the inflation target is at risk.
National Bank of Ukraine 2025-11-27
National Bank of Ukraine Governor outlines conditions for returning to classical inflation targeting and a floating exchange rate
Governor Andriy Pyshnyy of the National Bank of Ukraine discussed adapting Ukraine's inflation-targeting framework during wartime and plans to return to classical inflation targeting with a floating exchange rate as conditions normalize. He detailed the evolution from the 2015 launch, through the 2022 invasion, to recent steps like managed exchange rate flexibility and foreign exchange liberalization. The NBU's future strategy includes a gradual return to classical inflation targeting, emphasizing stability and decisive action when inflation targets are threatened.