The National Bank of Ukraine published opening remarks for its Sixth Annual Research Workshop on monetary policy in emerging market economies, using Ukraine’s wartime experience to set out five principles for keeping monetary transmission effective under extreme shocks. The speech argues that central banks must first keep the financial system functioning, then adapt instruments without changing strategic objectives, anchor expectations through communication, analyse sectoral and regional frictions rather than rely only on aggregate data, and maintain a long-term focus on price stability. To illustrate that framework, the National Bank of Ukraine recapped its wartime response, including emergency liquidity support, administrative restrictions, foreign exchange stabilisation and payment continuity, followed by a shift from an exchange rate peg to managed exchange rate flexibility and a gradual return to flexible inflation targeting. It said a June 2022 policy rate increase from 10% to 25% initially had weaker-than-expected transmission because wartime fiscal spending and international assistance concentrated excess liquidity in banks, prompting changes to the operational framework and reserve requirements and the introduction of a three-month liquidity absorption instrument linked to household term deposits. According to the speech, these measures helped bring inflation from 26.6% in 2022 to single digits and back to the 5% target in 2023, while cooperation with the government ended monetary financing of the budget from the start of 2023 and supported the domestic debt market. The remarks also pointed to double-digit lending growth for a third consecutive year, rising corporate loan penetration and a share of non-performing loans near historic lows, while warning that inflation risks remain elevated because of damage to energy infrastructure, disrupted logistics and exceptionally high fiscal spending. Against that backdrop, the National Bank of Ukraine said it remains prepared to respond with sufficiently tight monetary policy, liquidity sterilisation instruments or other measures if inflation pressures intensify, and framed the workshop around identifying where transmission breaks down across saving behaviour, lending activity, market segmentation and regional and sectoral asymmetries.
National Bank of Ukraine 2026-05-15
National Bank of Ukraine outlines five principles for monetary transmission under extreme shocks
The National Bank of Ukraine published opening remarks for its Sixth Annual Research Workshop on monetary policy in emerging market economies, outlining five principles for preserving monetary transmission under extreme shocks and illustrating them with its wartime policy response. It highlighted emergency liquidity and foreign exchange measures, a sharp policy rate hike to 25%, adjustments to the operational framework and reserve requirements, and liquidity absorption tools that helped stabilise inflation and support the domestic debt market. The bank reported continued double-digit lending growth and low non-performing loans but warned that elevated inflation risks from energy damage, logistics disruptions and high fiscal spending may require tighter policy and further sterilisation measures.