Banks expect cautious NBU decision on key rate due to inflation risks – survey
Increased inflationary pressure and global energy risks support expectations that the National Bank of Ukraine (NBU) will maintain a tight monetary policy, according to banks surveyed by Interfax-Ukraine.
The majority of respondents expect that at the meeting on Thursday the National Bank will keep the key rate at 15% per annum, while one of them allows for its increase to 15.5-16%.
"Since the beginning of March, inflationary pressure has noticeably increased in Ukraine, primarily due to a significant increase in fuel prices," Dmytro Zamotayev, director of the retail business department at Globus Bank, told the agency.
He believes that the baseline scenario is to raise the key rate to 15.5-16% at the next NBU meeting, and if inflationary pressure approaches the upper limit of the forecast range, a decision will be made in favor of 16%.
In March, according to a bank representative, the price of A-95 gasoline increased by approximately 14%, and diesel fuel by more than 36%. This dynamic is sensitive for the economy, as fuel costs are quickly passed on to prices for logistics, manufacturing, services, and food products.
"Raising the key rate in this situation will serve several functions at once: it should help slow inflationary pressure, serve as an additional safeguard against excessive pressure on the hryvnia, and increase the attractiveness of hryvnia savings instruments," he added.
Respondents explain the unchanged rate scenario by the fact that the impact of the geopolitical situation and global energy risks on inflation still requires further assessment.
"The current geopolitical situation, the dynamics of global energy risks, and the initial reaction of domestic markets to rising global energy prices indicate that the period of assessing and analyzing potential risks and their impact on the inflation environment is not over yet," said Oleksandr Pecherytsin, Director of Research at Raiffeisen Bank.
In his opinion, if geopolitical tensions persist, the rate could remain unchanged almost until the end of the year to control inflationary risks.
OTP Bank also does not expect a change in the key rate, as the current situation is not yet stable enough for such a decision, said Ina Provotar, Head of Management Accounting and Business Analysis at the bank.
"The situation must stabilize to the point where changes in the key interest rate become a boost to economic activity. Currently, this could further destabilize inflation," she noted.
Radabank expects the key rate to remain unchanged, as uncertainty surrounding the Strait of Hormuz leaves the oil factor as the main risk to inflation and interest rates, noted Serhiy Gnezdilov, Head of the International Markets and Money Circulation Department.
Regarding the update of the Central Bank's macroeconomic forecast for 2026, respondents expect a revision primarily of inflation estimates and the forecast trajectory of the key rate.
Zamotayev noted that inflation in March was 1.7% month-on-month and 7.9% year-on-year, and could reach 1.5-2% and 8.8-9.3%, respectively, by the end of April. He believes the regulator may be basing its inflation expectations on higher levels and a longer period of tight monetary policy.
Pecherytsin expects inflation by the end of the year to be closer to 10% than previously estimated. In his opinion, under this scenario, the NBU may revise its key rate forecast and hold off on monetary policy easing for longer.
As reported, on January 29 of this year, the National Bank lowered the key interest rate by 0.5 percentage points, from 15.5% to 15% per annum, before maintaining it at the same level at its subsequent meeting on March 19. In its January macroeconomic forecast, the regulator expected inflation to slow to 7.5% by the end of 2026.
