Ukraine Holds Interest Rate at 15%

The National Bank of Ukraine maintained its benchmark policy rate at 15% in its March 2026 meeting after delivering a 50bps cut in its first decision of the year. The hold contrasted with the earlier possibility that the central bank would attend to growth concerns and the labor market and continue to make monetary policy more accommodative. However, the outbreak of war in the Middle East and its risk on global energy supplies triggered surges in key energy prices, raising inflationary risks for the Ukrainian economy. Further, the geopolitical concerns lifted global demand for the dollar and pressured the hryvnia, further limiting the room for lower borrowing costs. Inflation had increased to 7.6% in February after a long period of decreases. The central bank signaled that it will refrain from resuming rate cuts until there is clear evidence that energy prices are not translating to unanchored inflation expectations.

The National Bank of Ukraine has begun easing monetary policy by cutting its key rate by 50bps to 15% in January 2026, reflecting easing inflationary pressures and reduced risks to external financing, while still aiming to return inflation to its 5% target over the medium term. Inflation slowed to about 8% year on year by the end of 2025 due to strong harvests, easing labor market pressures, and a stable FX market, and it is expected to keep declining in early 2026 before temporarily accelerating in the second half because of energy-sector damage and low base effects, ending 2026 at around 7.5%, falling to 6% in 2027 and reaching 5% in 2028. Economic growth remains modest due to the war, about 1.8% in 2025–2026, but should accelerate to 3–4% in 2027–2028 as reconstruction, investment, and energy recovery progress.

The National Bank of Ukraine held its key policy rate at 15.5% in its December meeting, maintaining borrowing costs at their highest level since November 2023. The decision reflects ongoing inflationary risks and uncertainties surrounding external financing. In November, both consumer and core inflation eased to 9.3% year-on-year, largely due to an increase in food supply from the new harvest, but remained well above the 5% target. Despite a disinflationary trend since June, inflation expectations remain elevated. Domestic economic activity and credit growth have remained robust, with lending expanding at an annual rate above 30%, indicating that no additional stimulus is needed. On the external side, Ukraine has received USD 45.8 billion in official financing this year, with another USD 5 billion expected by year-end, although funding plans for 2026–2027 remain uncertain. The ongoing Russia–Ukraine conflict continues to pose significant risks to both inflation and economic growth.