NBU raised the key policy rate to 15.5% amid a forecast of accelerating inflation

The National Bank of Ukraine raised the key policy rate by 0.5 percentage points to 15.5%, the regulator reported on July 30, writes UNN.

The Board of the National Bank of Ukraine decided to raise the key policy rate to 15.5% due to the persistent intensification of fundamental price pressure and a more significant acceleration of overall inflation by the end of the year

As noted, the increase in the key policy rate "is aimed at preserving the attractiveness of hryvnia assets, the stability of the foreign exchange market, and the controllability of inflation expectations, which will make it possible to return inflation to a trajectory of slowing down to the 5% target as early as 2027."

The NBU is ready to further tighten interest rate policy

"The NBU is ready to continue using monetary policy instruments, in particular, to further tighten interest rate policy to curb price pressure," the regulator noted.

The current forecast of the National Bank, as stated, "provides for the possibility of a further increase in the key policy rate and a return to the cycle of easing interest rate policy in the second quarter of 2027." At the same time, the NBU "will respond flexibly both to inflation dynamics and to changes in the distribution of risks."

"In addition, the National Bank will begin modernizing the operational design of interest rate policy, the strategic direction of which is to activate the money market and develop reliable market benchmarks of value on it. As a result, the changes will strengthen the NBU's ability to fulfill the main task of monetary policy – ensuring price stability – by increasing the efficiency of monetary transmission," the statement reads.

The NBU also listed the key conclusions:

• over the past months, overall inflation has slowed under the influence of temporary factors, but fundamental price pressure continued to intensify;
• inflation will accelerate in the second half of the year, but will return to a slowdown in 2027, including thanks to NBU measures;
• the expansion of fiscal stimulus supports economic growth, but it will be restrained by the consequences of the intensification of russian attacks on infrastructure and business facilities;
• the expected volumes of external support will be sufficient for non-emission financing of the budget deficit and maintaining a stable situation on the foreign exchange market;
• the key risk for inflation dynamics and economic development remains the course of the full-scale war, but further developments in the Middle East may also have a significant impact.

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