Ukraine holds key rate at 15% as inflation risks persist after Middle East energy shock
on Google
The National Bank of Ukraine voted to keep its benchmark interest rate unchanged at 15% on June 18 as policymakers remain cautious in the wake of a peace deal between the U.S. and Iran.
The war in the Middle East caused global energy prices to surge, after oil and gas infrastructure across the region was damaged and oil tankers were blocked from traveling through the Strait of Hormuz, a key artery for global oil and gas flows.
The conflict contributed to a bump in inflation in Ukraine at a fragile moment for the country, emerging from the most severe energy crisis of Russia's full-scale invasion and uncertainty over the timing and size of foreign aid, on which Ukraine depends.
The bank said that inflation slowed in May to 8.2%, after a bump from 7.4% in January to 8.6% in April, partly driven by the war in the Middle East.
But in a sign that risks have still not abated, the bank also said that it was "ready" to raise its key policy rate to keep inflation in check, in a press release. A higher key rate encourages saving over consumption, helping to tame inflation.
Alongside Russia's continued war and the fragile peace in the Middle East, the bank also highlighted high wages driven by labor shortages and emigration, and the potential need to import more goods for reconstruction and defense needs, all of which could drive prices higher.
The NBU said that Ukraine's economy will grow 1.8% in 2026 in a January forecast but slashed it by half a percentage point in April to 1.3% following Russia's devastating bombing campaign against the country's energy infrastructure over the winter, denting economic activity.
Ukraine's central bank targets 5% inflation, but has witnessed two significant bouts of inflation since Russia's full-scale invasion.
Inflation rose to 26.6% in October 2022 from 10.0% on the eve of Russia’s full-scale invasion. The bank responded by raising the key rate from 10.0% to 25.0% in June 2022, where it remained until July 2023.
A second bout of inflation peaked at 15.9% in May 2025, driven by a poor harvest in 2024, higher energy and labor costs, and robust consumer demand.
The key rate has not fallen below 13% since the full-scale invasion.
