Ukraine’s Central Bank Holds Interest Rate to Tackle Inflation and Bolster Economic Stability

In an effort to balance stability in the foreign exchange market and guide inflation toward its target, the National Bank of Ukraine has opted to keep its key policy rate unchanged at 15.5%.

Recent data indicate a notable slowdown in inflation, with the annual rate easing to 13.2% in August, a decline that has outpaced earlier forecasts. This progress comes amid improved harvest yields, which have dampened food price growth, and previous monetary tightening that has cooled demand across services and non-food sectors. Improved inflation expectations among consumers and analysts reflect these developments, though concerns about persistent double-digit inflation and heightened household attention to the issue suggest that risks remain. On the fiscal front, robust support from international partners—including over $30 billion in assistance this year—has strengthened Ukraine’s international reserves and enabled the government to cover key expenditures despite ongoing wartime disruptions.

However, heightened military activity, the potential for irregular external funding, labor market challenges, and global volatility continue to cloud Ukraine’s economic outlook. The central bank reiterates its commitment to flexibility, indicating readiness to maintain or tighten policy if inflation risks rise, but also signaling the possibility of rate cuts later in 2025 should stable conditions persist. This cautious approach underscores the ongoing importance of monetary policy in safeguarding Ukraine’s financial system and ensuring gradual progress toward price stability.

The NBU’s decision marks a critical juncture in steering Ukraine’s economy through a period of pronounced uncertainty, reinforcing both domestic confidence and the attractiveness of local currency assets.