Ukraine Interest Rate

The National Bank of Ukraine has begun easing monetary policy by cutting its key rate by 50bps to 15% in January 2026, reflecting easing inflationary pressures and reduced risks to external financing, while still aiming to return inflation to its 5% target over the medium term. Inflation slowed to about 8% year on year by the end of 2025 due to strong harvests, easing labor market pressures, and a stable FX market, and it is expected to keep declining in early 2026 before temporarily accelerating in the second half because of energy-sector damage and low base effects, ending 2026 at around 7.5%, falling to 6% in 2027 and reaching 5% in 2028. Economic growth remains modest due to the war, about 1.8% in 2025–2026, but should accelerate to 3–4% in 2027–2028 as reconstruction, investment, and energy recovery progress.

The National Bank of Ukraine held its key policy rate at 15.5% in its December meeting, maintaining borrowing costs at their highest level since November 2023. The decision reflects ongoing inflationary risks and uncertainties surrounding external financing. In November, both consumer and core inflation eased to 9.3% year-on-year, largely due to an increase in food supply from the new harvest, but remained well above the 5% target. Despite a disinflationary trend since June, inflation expectations remain elevated. Domestic economic activity and credit growth have remained robust, with lending expanding at an annual rate above 30%, indicating that no additional stimulus is needed. On the external side, Ukraine has received USD 45.8 billion in official financing this year, with another USD 5 billion expected by year-end, although funding plans for 2026–2027 remain uncertain. The ongoing Russia–Ukraine conflict continues to pose significant risks to both inflation and economic growth.

The National Bank of Ukraine kept its key policy rate at 15.5% during its October meeting, maintaining borrowing costs at the highest level since November 2023, as inflation expectations remained elevated and inflationary risks increased, particularly due to larger energy shortages and rising budgetary needs. Consumer inflation slowed to 11.9% year-on-year in September, down from 13.2% in August, and policymakers expect this trend to have continued in October. Nevertheless, inflation remains well above the central bank’s 5% target, with underlying price pressures persisting and core inflation easing only gradually. Inflation expectations among most surveyed groups showed little improvement over the past quarter, reflecting the ongoing impact of the war. Looking ahead, the central bank expects to begin interest rate cuts in Q1 2026, but warned that the timeline could be delayed if pro-inflationary risks intensify or underlying price pressures remain significant.