Ukraine's National Bank (NBU) announced on Jan. 23 that it will raise the key policy rate from 13.5% to 14.5% per annum starting from Jan. 24.
The Ukrainian economy was heavily hit by Russia's full-scale war. At the start of the invasion, inflation skyrocketed to 26.6% in 2022 from 10.0% in 2021. It subsided the following year but in 2024, the inflation again accelerated to 12%, exceeding NBU's forecast.
"In order to maintain the stability of the foreign exchange market, keep expectations under control, and gradually bring inflation to the 5% target on the policy horizon, the NBU Board decided to raise the key policy rate by 1% to 14.5%," chairman Andrii Pyshnyi said in a press briefing.
The NBU raised its key policy rate to 10% in January 2022. It had remained unchanged since the beginning of the all-out war, but on June 3, 2022, the rate grew from 10% to 25%.
For over a year, it remained at the same level, dropping to 22% in July 2023 and following a gradual decline. In December 2024, the NBU raised the key policy rate from 13% to 13.5% in response to inflationary developments.
According to Pyshnyi, the NBU will likely continue "tightening interest rate policy if signs of sustained inflationary pressure and the threat of imbalance in inflation expectations persist."
Inflation is likely to continue rising in the first months of 2025, peaking in the second quarter and then starting to decline in the middle of the year. According to the NBU's forecast, inflation will slow to 8.4% by the end of 2025 and to 5% in 2026.
"This will be supported by the NBU's interest rate and exchange rate policies, as well as by higher harvests, an improvement in the energy sector, a reduction in the fiscal deficit, and moderate external price pressure," NBU's statement read.
Tim Zadorozhnyy
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