National Bank of Ukraine leaves rates unchanged in September

Rates remain at near two-year high: At its meeting on 11 September, the National Bank of Ukraine (NBU) decided to maintain its key policy rate at 15.50% for the fourth consecutive meeting, in line with market expectations. As such, the policy rate remained at the highest level since November 2023.

Declining inflation drives the decision: The NBU argued that the decision will safeguard stability in the foreign exchange market, anchor consumer price expectations and steer inflation toward its 5.0% target. In August, inflation eased for the third straight month and at a faster pace than previously expected, helped by the new harvest. Moreover, the NBU forecasts price pressures to ease over the coming months, supported by incoming food supplies as well as its own measures to keep the currency market stable. The NBU stated that the ongoing full-scale war is the main risk for both inflation and the broader economy, while external assistance continues to enable an adequate level of reserves and fiscal support.

Easing cycle to start in Q4: In its forward guidance, the NBU indicated that it would begin cutting the policy rate in Q4. However, it cautioned that it could delay easing if warranted by future data or price trends. In line with this, our panelists anticipate the NBU to start cutting interest rates from Q4, with most expecting 50–150 basis points of reductions by December. A small minority, however, projects rates to remain at current levels through year-end. The Bank will reconvene on 23 October.

Panelist insight: Commenting on the outlook, EIU analysts stated: “We see no likelihood of further tightening in 2025 and believe that the chances of the NBU cutting at the next meeting remain broadly even. We maintain our forecast that the policy rate will end the year at 15%, with one cut of 50 basis points remaining most likely, although the risk is to the downside, with the potential for the bank to cut twice in its final two meetings of the year in October and December.”

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