Ukraine's National Bank predictably keeps key policy rate at 15.5%

The board of the National Bank of Ukraine (NBU) has decided for the sixth time to keep the key policy rate at 15.5% per annum to preserve interest in hryvnia instruments, maintain currency market stability, and anchor inflation expectations as inflation gradually approaches the 5% target over the policy horizon.

"In the coming months, inflation will continue to decline, although at a more moderate pace due to the exhaustion of base effects. Sustaining interest in hryvnia-denominated assets will help restrain fundamental price pressures," the regulator said in a statement on Thursday.

In November, both headline and core inflation slowed to 9.3% year-on-year, slightly below the forecast trajectory. Inflation eased due to increased food supply following new harvests, although inflation expectations remain elevated.

The central bank also pointed out that since the beginning of the year, Ukraine has received $45.8 billion in official financing, with more than $5 billion expected by year-end. External support helps maintain international reserves at an adequate level and ensures non-monetary financing of the budget, though uncertainty persists regarding assistance parameters for 2026–2027.

Among key risks, the regulator cited the course of the war, possible additional budget expenditures, the consequences of damage to energy infrastructure, and a deepening labor shortage.

According to the NBU, maintaining the rate in previous months supported yields on hryvnia instruments, contributed to an increase in term deposits and to the population’s purchases of domestic government bonds, while also limiting demand for foreign currency. At the same time, lending continues to grow at more than 30% year-on-year.

"In the event of rising inflation risks, we are prepared to refrain from easing monetary policy and, if necessary, take additional measures. Conversely, if these risks weaken, it will allow us to begin a rate-cutting cycle," the NBU said.

The overwhelming majority of market participants surveyed ahead of the meeting expected the NBU to keep the key rate unchanged at 15.5%.

As reported, the central bank has held the key rate at 15.5% since early March 2025, after raising it three times from mid-December 2024. Before that, it held the rate at 13% for six months, a level reached through seven consecutive reductions from 25% starting in July 2023.