Ukraine's National Bank keeps key policy rate at 15% as expected, sees no cuts until Q2 2027

The Board of the National Bank of Ukraine (NBU) has decided to keep the key policy rate at 15% per annum, moving in line with market expectations, while revising its projected path to keep the rate at this level until the second quarter of 2027.

"Maintaining appropriate monetary conditions will facilitate inflation’s return to a path of steady deceleration toward the 5% target within the policy horizon (by 2028). Should risks to price dynamics intensify, the NBU stands ready to deploy additional measures to curb inflationary pressure," the regulator stated in a press release on Thursday.

The NBU lowered the key rate to 15% in late January of this year. Prior to that, it had held the rate at 15.5% for seven consecutive meetings starting in March 2025, following three hikes beginning in mid-December 2024. In mid-March, the NBU opted to keep the rate at 15%.

Following a prolonged slowdown, inflation has begun to climb again. The regulator cited rising energy costs, exacerbated by Russian strikes on the power grid and the war in the Middle East, as the primary driver of this reversal, along with the previous weakening of the hryvnia and faster wage growth.

In March, year-on-year inflation accelerated to 7.9%, while core inflation rose to 7.1%; both figures exceeded the NBU’s January forecast. The regulator estimated that inflation continued to rise through April.

The National Bank projects that inflation will remain near current levels over the coming months before accelerating to 9.4% by the end of the year. For 2027, the regulator expects a return to a steady decline, reaching 6.5% by year-end and hitting the 5% target in 2028.

Additionally, the central bank downgraded its 2026 real GDP growth forecast to 1.3%, citing weak Q1 results, the strained energy system, and the negative spillover from the conflict in the Middle East. Growth is expected to pick up to 2.8-3.7% in 2027-2028.

The summary of the Monetary Policy Committee discussion that preceded the decision to hold the rate at 15% will be published on May 11. The next NBU Board meeting on monetary policy is scheduled for June 18.