According to the National Bank of Ukraine (NBU), the regulator sees no grounds for lowering the policy rate in the coming months and allows that its trajectory may turn out higher than previously expected. The discussion on monetary policy took place on 28 October with all 11 members of the Monetary Policy Committee present.
September inflation accelerated to 10%
Annual inflation in September reached 10% compared with the earlier expected 8,4%, and core inflation stood at 8,8% instead of the projected 8,3%. The NBU notes that both indicators continued to rise in October.
The share of goods and services in the consumer basket with price increases of more than 10% rose from 42% in August to 48% in September. At the same time, real GDP contracted in the third quarter, business sentiment worsened across all sectors, and some firms reduced hiring.
Committee decision: votes in favour of raising to 16,5%
During the October discussion, eight of the 11 members of the Committee supported raising the policy rate from 16% to 16,5%, a decision later adopted by the NBU’s Board. Three members supported keeping the rate at 16%, considering previous increases sufficient.
Participants in the discussion broadly agreed that it is not the time to lower the rate in the coming months, and most allowed that the further trajectory may be higher than that in the NBU’s previous forecast.
Rising inflation expectations and currency risks
Inflation expectations are worsening: financial analysts raised forecasts from 7,5% in June to 8,8% in October, and banks — from 8,7% to 10% over the same period. The Committee expressed concern about the risk of an inflationary “wage–price” spiral.
The NBU also noted risks in the foreign-exchange market due to losses of production capacity, problems with maritime exports and rising imports of energy carriers and equipment, which increase the private sector’s currency deficit and force the regulator to sell foreign currency more actively.
Assessment of the impact of Russian attacks and possible easing in 2027
The NBU estimates that the consequences of Russian attacks in the second half of 2026 will add about 0,7% to annual inflation, with nearly two-thirds of this additional increase affecting the food segment. According to the regulator’s estimate, the attacks affected about 40% of the consumer basket.
The NBU sees some room to ease monetary policy in 2027: participants in the discussion expect the policy rate could be gradually reduced to roughly 14% provided inflation slows and risks to price stability diminish, but this is not guaranteed and will depend on actual price dynamics and expectations.
