Ukraine Interest Rate

National Bank of Ukraine raises policy rate in July

NBU hikes, surprising markets: At its meeting on 30 July, the National Bank of Ukraine (NBU) raised its key policy rate by 50 basis points to 15.50%. The decision followed three consecutive holds at 15.00% after a 50 basis point cut in January and surprised markets, which had penciled in another hold.

Persistent underlying price pressures prompt tightening: The NBU raised rates as underlying price pressures continued to strengthen despite a brief slowdown in headline inflation in June. Moreover, the Bank expects headline and core inflation to accelerate to 10.0% and 9.2%, respectively, by the end of 2026, driven by stronger budget stimulus, rising labor costs, secondary effects from higher fuel prices and the earlier weakening of the hryvnia. The rate hike is intended to preserve the attractiveness of hryvnia-denominated assets, support foreign-exchange-market stability, keep inflation expectations under control and gradually bring inflation back to the NBU’s 5.0% target.

NBU likely to hike again: The NBU stated that further rate increases remain possible if inflationary pressures intensify. The Bank anticipates a return to monetary easing in the second quarter of 2027, provided inflationary risks subside. Almost all of our panelists see another 50 basis point hike by year-end, as inflation is projected to average sharply above the NBU’s target and the hryvnia is set to end the year at record-weak levels amid Russia’s prolonged invasion fueling business costs and denting investor sentiment. The NBU will reconvene on 17 September.

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