Ukraine's National Bank expectedly cuts key policy rate from 15.5% to 15% per annum
The Board of the National Bank of Ukraine (NBU) has decided to reduce the key policy rate from 15.5% to 15% per annum, citing a sustained decline in inflationary pressure and a weakening of risks related to external financing.
"A decline in price pressures, together with easing risks of insufficient external financing, creates room for monetary policy easing. This decision is consistent with bringing inflation back to the 5% target over the policy horizon and will at the same time support the economy," the NBU said in a press release on its website.
Other policy rates were also reduced by 0.5 percentage points: the overnight deposit certificate rate was lowered to 15% per annum, the three-month deposit certificate rate to 18.5% per annum, and the refinancing loan rate to 19.5% per annum.
The regulator reported that in December both headline and core inflation slowed to 8% year-on-year, and according to its estimates, the annual pace of price growth continued to decelerate in January as well, despite relatively elevated inflation expectations.
Under the updated forecast, inflation is expected to decline to 7.5% by the end of 2026, to 6% by the end of 2027, and to return to the 5% target in 2028.
At the same time, the course of the full-scale war remains the key risk to inflation and economic development, in particular due to the destruction of energy infrastructure, fiscal needs, and labor shortages.
The baseline scenario of the NBU’s January macroeconomic forecast provides for a gradual further reduction of the key policy rate over the forecast horizon.
"If risks to price dynamics increase, the NBU will refrain from easing its interest rate policy further, and will be ready to take additional measures if required. At the same time, a weakening of pro-inflationary risks will signal faster cuts in the key policy rate than foreseen by the revised macroeconomic forecast," the statement said.
Ahead of the meeting, bankers’ views were divided: some expected the regulator to keep the key policy rate at 15.5%, while the majority of respondents forecast a cut to 15.0%.
As reported, starting in March 2025 the National Bank held the key policy rate at 15.5% for seven consecutive meetings, having raised it three times prior to that beginning in mid-December 2024.