The National Bank has raised the key interest rate to 14.5%.

The National Bank of Ukraine's board has decided to raise the key interest rate to 14.5% per annum. This decision aims to maintain the stability of the foreign exchange market, keep inflation expectations under control, reverse the inflation trend, and gradually reduce inflation to the target of 5%.

This is mentioned on the NBU website.

Containing price pressure will likely require further tightening of monetary policy.

Inflation reached 12% in 2024, and price pressure persists at the beginning of 2025.

In December 2024, inflation accelerated to 12% year-on-year, exceeding the previous forecast of the National Bank. According to NBU estimates, inflation continued to accelerate in January.

Prices are rising due to poor harvests from the previous year, asserts the National Bank. At the same time, fundamental price pressure has intensified. This is evidenced by the further acceleration of core inflation (to 10.7% year-on-year in December), particularly due to a sharp increase in service prices (12.5% year-on-year in December).

This price dynamics has been driven by increased costs for businesses on raw materials, supplies, and electricity, as well as rising wages amid a persistent labor shortage. However, in recent months, the increase in prices has been somewhat tempered by the strengthening of the hryvnia against the euro, which is significant for Ukrainian imports.

The transition of inflation to double-digit levels negatively impacts inflation expectations among the population and businesses. Nevertheless, the expectations of financial analysts and banks remain relatively stable.

Thanks to the exhaustion of temporary price pressure factors and the measures of interest and exchange rate policy by the NBU, inflation is expected to slow down to 8.4% in 2025 and reach the target of 5% by 2026.

In the first months of 2025, inflation is likely to continue rising.

It is anticipated that by the end of 2025, inflation will slow down to 8.4%, and in 2026, to the target of 5%. This will be facilitated by measures of interest and exchange rate policy from the National Bank, as well as higher harvests, improvements in the energy sector, a reduction in the fiscal deficit, and moderate external price pressure.

International support will be sufficient for non-emission financing of the budget deficit and maintaining stability in the foreign exchange market.

In 2024, Ukraine received $42 billion from international partners in the form of loans and grants. Thanks to these funds, the government was able to finance a significant budget deficit (about 24% of GDP excluding grants in revenues), while the NBU was able to support the stability of the foreign exchange market and increase international reserves to a new historical high ($43.8 billion at the end of 2024).

It is expected that in 2025, Ukraine will receive $38.4 billion in external financing.

The updated macroeconomic forecast of the NBU anticipates further increases in the key interest rate to curb inflation.