Ukraine’s Central Bank Holds Rates Steady Amid Persistent Inflation and Economic Uncertainty

The National Bank of Ukraine has opted to maintain its key policy rate at 15.5%, signaling a commitment to monetary stability as the country grapples with elevated inflation and significant economic uncertainty.

Despite inflation rising to 14.6% year-on-year in March—driven by lingering effects from last year’s poor harvests, higher excise prices, and increasing business costs—the central bank is banking on recent measures to keep inflation expectations in check. Household sentiment has shown signs of improvement, and attention to inflation among the public appears to be waning, though businesses remain cautious. The central bank projects that inflation will begin to slow over the summer, ultimately falling to single digits by the end of the year and returning to the 5% target in 2026, aided by an expected rebound in agricultural output, easing labor and energy cost pressures, and stabilizing global commodity prices.

Ukraine's economy continues to inch toward recovery, with a forecasted growth of 3.1% in 2025. This modest expansion is buttressed by factors such as stronger harvests and easing electricity shortages, although the aftermath of war—and escalating geopolitical tensions—continues to limit potential. Looking further ahead, growth is expected to accelerate in 2026 and 2027, underpinned by reconstruction investment and resilient consumer demand, even as external financial aid gradually declines from this year's peak levels.

The central bank remains vigilant about key risks, particularly the ongoing war, possible additional budget needs for defense, and further infrastructure destruction. Labor shortages and the broader impact of global trade disputes also loom large. While some global challenges could indirectly benefit Ukraine—such as increased demand for defense technologies or cheaper energy prices—the overall outlook hinges on the pace of conflict resolution, access to international support, and Ukraine’s ability to adapt its exports to shifting global markets.

By holding the policy rate steady and maintaining prudent monetary measures, the National Bank of Ukraine aims to reinforce economic confidence and gradually guide inflation back to target, underscoring the critical role of careful policymaking in a volatile environment.