The National Bank of Ukraine is keeping its benchmark interest rate locked at 15.5%. Not really surprising, given the ongoing conflict, unpredictable crop yields, and a generally rocky economic landscape. The bank’s playing it safe, which honestly seems like the only move right now. Also, stability remains the priority, both for inflation and the currency.
Governor Andriy Pyshnyi noted that inflationary pressures have somewhat subsided. However, he clarified, there are still serious risks. For this reason, the central bank is being cautious and refraining from making sudden policy changes.
Why the National Bank of Ukraine Keeps Rate Unchanged
Ukraine’s central bank reports that inflation peaked in May and has been easing off since June. Although prices are still sitting above where most would like them. Also, core inflation is declining at a faster clip than experts anticipated. Yet cost pressures from essentials, food, wages, and raw materials aren’t exactly letting up.
On policy, the bank is keeping the interest rate unchanged. The thinking? Staying the course should steady the nerves of households, analysts, and companies, ensuring that inflation will not escalate. The FX market has been stable, too; the hryvnia and dollar are showing only moderate movement. Thus, this helps prevent ugly import price shocks.
How the National Bank of Ukraine Decision Shapes FX
Financial markets responded with measured relief, but nothing alarming either. Domestic bond yields basically held steady, while interest in UAH term deposits picked up. So, it is signaling some renewed confidence on the local side. On the currency front, traders noticed the hryvnia was less volatile versus the dollar, even if it lost some ground against the euro.
On policy, the National Bank of Ukraine adjusted its outlook for 2025, cutting the GDP growth forecast to 2.1%. Also, it is down from earlier hopes around 3.1%. Inflation, on the other hand, is expected to reach 9.7% by year-end 2025. And forecasts show a gradual cool-off: 6.6% in 2026, and, if all goes to plan, 5% by 2027.
Analyst sentiment around inflation expectations is looking better, whereas households are still cautious and monitoring possible rises in prices. That said, confidence seems solid over a longer horizon, giving the central bank some flexibility to avoid extra tightening unless circumstances demand it.
Will Policy Support Recovery And Growth Ahead?
The National Bank of Ukraine is holding steady, keeping the key interest rate at 15.5% for the third straight meeting. In this environment? Pretty logical. With the war still taking a heavy toll, steering clear of unnecessary risks seems like the most prudent move right now. Stability over surprises, at least for the time being.
The energy sector continues to experience significant disruptions, while global commodity markets remain notoriously unpredictable. Understandably, stability has become a top priority. The government is keeping a close watch on financial movements to make sure fiscal obligations are covered.
Also, improved weather and stronger agricultural output could provide some relief on the food inflation front. If the conflict eases, funding from abroad remains reliable, and inflation expectations continue to trend down. Plus, the central bank might gradually shift toward an easier monetary stance.
Where Does Ukraine Go From Here Next?
The National Bank of Ukraine’s decision to keep the policy rate at 15.5% isn’t exactly shocking. On one hand, inflation’s finally cooling a bit, a long overdue sigh of relief. The bank is holding this line to steady the FX market and try to prevent inflation expectations from spinning out. Growth in 2025? “Modest” is probably the nicest way to put it. But, there’s a shot things’ll pick up if external factors stop piling on.
For traders watching currency markets, don’t expect any dramatic rate cuts in the near future. Stability for the hryvnia seems to be in reach, but let’s not pretend it’s immune to major shocks, whether that’s geopolitics or supply chain bugs.
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