Ukraine Delivers Back-to-Back Rate Hikes

The National Bank of Ukraine raised its key policy rate by 50bps to 16% on its September 2026 decision, following up on the 50bps hike in its previous meeting, which was the first hike in 18 months. The Board of the central bank noted that underlying inflationary pressures continued to increase due to second-round effects from supply shocks on global energy markets. Inflation in Ukraine rose to 8.1% in August, slightly ahead of expectations by the central bank, as the escalation in the war in the Middle East triggered a sharper than expected jump in fuel inflation. In turn, the labor market remained relatively stable in the period, with robust employment and higher wage growth. The developments warranted more restrictive interest rates, which will also support the hryvnia and prevent capital outflows from residents and domestic companies.

The National Bank of Ukraine raised its benchmark policy rate by 50bps to 15.5% in it July 2026 decision, its first rate hike in 16 months. The Board of the central bank stated that underlying inflationary pressures have risen in recent months and are likely to lift the headline inflation rate until the end of the year, warranting higher borrowing costs. The Board also noted that higher rates will increase the attractiveness of hryvnia-denominated assets and prevent higher levels of capital flight from households and businesses domestically. The NBU estimated that inflation could rise to the 10% level by the end of the year from the current 7.2% reading in June, before easing by next year. Meanwhile, expanded fiscal stimulus is expected to support economic growth, although inflationary responses are unlikely due to the impact of the Russian military attacks on aggregate demand.

The National Bank of Ukraine maintained its benchmark policy rate at 15% in its June 2026 meeting, a third consecutive hold since the 50bps rate cut at the start of the year. The central bank noted that the current levels of interest rates ensured a sufficiently tight monetary backdrop for the Ukrainian economy and was high enough to stimulate demand for hryvnia denominated fixed income. Still, the NBU delivered a hawkish outlook by noting it is ready to raise interest rates should it see that higher energy prices from the war in the Middle East are becoming entrenched in core sectors of the price basket. Consumer inflation slowed to 8.2% in May but core inflation rose to 7.9%, both above forecasts from the central bank. The NBU expects inflation to remain steady in the coming months and rise at the end of the year, before dropping in 2027.