National Bank of Ukraine cuts key policy rate to 15% and begins an easing cycle

The National Bank of Ukraine (NBU) Board has begun an interest rate easing cycle by cutting the key policy rate by 0.5 percentage points from 15.5% to 15%, with other policy rates reduced simultaneously. The NBU framed the move as consistent with returning inflation to its 5% target over the policy horizon while supporting economic activity, while keeping monetary conditions tight enough to preserve foreign exchange market sustainability. Inflation slowed to 8% year on year for both headline and core measures in December, and the NBU estimates annual consumer price growth eased further in January, although inflation expectations remain relatively high. In its baseline forecast, inflation is projected to decline to 7.5% by end-2026, slow to 6% by end-2027, and reach the 5% target in 2028, with energy-sector damage and uncertainty around utility tariff adjustments highlighted as key drivers of near-term pressure. Real GDP growth for 2025 was revised down to 1.8%, with 2026 also seen at 1.8% and growth accelerating to around 3%–4% in 2027–2028; external financing assumptions include EU financial assistance of EUR 90 billion over 2026–2027, ongoing support under the ERA Loans mechanism, and an IMF program of USD 8.1 billion under approval, alongside reserve projections of USD 65 billion at end-2026 and USD 71 billion at end-2028. The NBU’s baseline scenario envisages a gradual reduction in the key policy rate over the forecast horizon, but it signalled it would refrain from further easing and could take additional measures if price risks intensify, while weaker pro-inflationary risks could lead to faster cuts than currently envisaged.