The National Bank of Ukraine has raised its key policy rate by 1% to 14.5%.
This was announced at a briefing by NBU Governor Andriy Pyshnyy, Ukrinform reports.
"The Board of the National Bank of Ukraine has decided to set the discount rate at 14.5% starting from 24 January 2025," Pyshny said.
"This decision is aimed at maintaining the stability of the foreign exchange market, keeping inflation expectations under control, reversing the inflation trend and gradually slowing inflation to the 5% target. Containing price pressures will likely require further tightening of interest rate policy," he added.
- In January 2022, the NBU raised its key policy rate to 10%. The key policy rate remained unchanged since the start of Russia's military aggression. However, on 3 June 2022, it was raised from 10% to 25%. It remained at this level for more than a year.
- On 27 July 2023, the rate was cut to 22%, and its gradual decline continued.
- Until December 2024, when the rate was raised to 13.5% in response to inflationary developments.
According to the State Statistics Service, annual inflation in Ukraine was 12.0% in December 2024.
The NBU discount rate is one of the key monetary policy instruments that determines the value of money in Ukraine. It determines the rate at which the NBU grants loans to banks and accepts deposits from them. The key policy rate affects the overall level of interest rates in the economy, including interest rates on loans and deposits for businesses and individuals.
The main indicator that the NBU regulates through the key policy rate is the inflation rate. If the rate is raised, inflation should fall over time. On the contrary, a rate cut can accelerate inflation. Currently, price growth in Ukraine has accelerated to 12.0% in December. Inflation will continue to rise in the coming months. Under such conditions, central banks usually cut the key policy rate. There is a consensus among economists that the key policy rate should be higher than the expected inflation rate.