Ukraine's Inflation Targeting Journey and the Lessons of Crisis Resilience

Ukraine’s central bank has shared a unique perspective on how its approach to monetary policy has evolved during extraordinary times, including full-scale war and geopolitical upheaval. The ten-year journey of inflation targeting in Ukraine began in 2015 amid skyrocketing inflation and external aggression, with policymakers choosing stability over hesitation despite intense doubts and global uncertainty.

Since its introduction, inflation targeting helped stabilize the economy and foster trust—seen as the foundation for subsequent resilience. This trust proved vital when the central bank had to introduce extraordinary measures, such as fixing the exchange rate and imposing currency controls, to prevent a financial meltdown at the onset of the Russian invasion in 2022. These crisis tools were deployed swiftly, but with a clear strategy for gradual removal once the situation allowed, ensuring that policy flexibility and credibility were not lost.

Ukraine’s experience shows that while strict adherence to policy models may be impossible in crisis, maintaining transparent principles and adapting flexibly allows monetary policy to remain effective. The bank sees its path forward as a careful balance between returning to classical inflation targeting and integrating lessons learned from wartime—a blend of steadfastness and flexibility. The central message is that, even under the most intense stress, adaptive and principled monetary policy can provide crucial economic stability and lay the groundwork for future recovery and growth.

This journey stands as a testament to how emerging markets can fortify their financial systems and public trust, even in the face of profound adversity and uncertainty.