The Board of the National Bank of Ukraine has decided to keep its key policy rate at 15.5%. Despite a decline in inflation over the past months, inflation expectations remained high and inflationary risks rose, particularly those related to larger energy shortages and greater budgetary needs. Under such conditions, in order to maintain the attractiveness of hryvnia assets, the sustainability of the FX market, and the steady decline in inflation toward the 5% target over the policy horizon, the NBU will stick to relatively tight monetary conditions.
Inflation is declining, but the underlying price pressure persists, while there are no signs of a steady improvement in expectations
Consumer inflation slowed to 11.9% yoy in September. According to the NBU’s estimates, this trend continued in October. Although the growth rates of consumer prices deceased faster than forecast in the NBU’s July Inflation Report, this was primarily driven by an increase in supply of vegetables on the back of larger harvests compared to the last year.
On the other hand, core inflation declined at a slower pace (to 11.0% yoy in September). The underlying price pressure persisted, particularly as businesses continued to incur high costs of labor and energy. As a result, the growth rates of prices for a number of core inflation components either declined slowly (processed foods) or did not decline at all (services).
Inflation expectations of the majority of respondent groups did not improve in the past quarter (except for the expectations of the banks). Although the expectations of financial analysts were relatively close to the NBU’s forecasts, the expectations of other respondent groups remained high. That said, households’ attention to the topic of inflation rose, as seen from the web search statistics.
The NBU’s monetary policy is aimed at bringing inflation down to the 5% target over the policy horizon
The slowdown in inflation will be facilitated by the pass-trough to consumer prices from the effects of this year’s harvests of vegetables and grains, further increases in harvests, which are assumed by the NBU’s forecast, and by monetary policy measures aimed at supporting interest in hryvnia assets and the sustainability of the FX market. Labor market mismatches are also expected to partially decrease over the forecast horizon, contributing to slower growth in real wages and thus easing the pressure on the costs incurred by businesses. At the same time, disinflation will be restrained by businesses’ additional expenses on ensuring uninterrupted operation amid energy shortages and by the rapid growth in administered prices. The NBU forecasts inflation to decline to 9.2% in 2025, to 6.6% in 2026, and reach the target of 5% at the end of 2027.
The economy continues to grow, but the pace of its growth will remain moderate due to the effects of the war
As per the NBU’s estimates, economic growth picked up in Q3 2025 thanks to the intensification of early crop harvesting, sustained consumer demand, and an improved situation in the energy sector, which lasted through the end of September. The expected increase in budgetary stimuli at the end of the year will support further recovery. However, energy shortages caused by the recent destruction of infrastructure and natural gas production facilities, coupled with labor shortages, will significantly hamper businesses activity. In view of the above, the NBU has revised its economic growth forecast for 2025 downward, to 1.9%.
In the following years, economic growth is expected to accelerate moderately on the back of larger harvests and increased investments in reconstruction projects and the defense sector. Investment activity will also be positively impacted by Ukraine’s further progress on the path of European integration and the economy’s gradual return to normal functioning conditions, which will be reflected, among other things, in the stabilization of the energy sector and the reversal of the negative migration trend. Considering the said factors, the NBU forecasts Ukraine’s real GDP to grow by 2% in 2026 and 2.8% in 2027.
Volumes of international assistance remain sufficient for non-monetary financing of the budget deficit and for maintaining an adequate level of international reserves
Ukraine continues to receive international support In August–October, Ukraine received about USD 13 billion in external financing. By the end of 2025, another USD 15 billion is expected to arrive.
The NBU’s updated forecast assumes that stable and sufficient international financing will be maintained in the coming years, mainly due to reparation loans based on frozen russian assets. This will allow for the continued financing of the budget deficit without resorting to monetary financing. It will also be possible to keep international reserves at a sound level, sufficient to support the sustainability of the FX market.
The course of the full-scale war continues to be the key risk to inflation dynamics and economic development
The war is continuing. The past few months have seen an increase in the intensity of air attacks on and the destruction of, energy infrastructure, logistics, and production facilities. This has already been reflected in the revision of forecast indicators and has increased the risks of higher price pressures and a further decline in economic potential.
Other war-related risks have also increased, including:
- the emergence of additional budgetary spending on defense capabilities and reconstruction
- insufficient and/or irregular arrival of external financing in the coming years and
- a deepening of adverse migration trends and a widening of labor shortages on the domestic labor market mainly due to persisting high security risks.
Furthermore, there are risks that external conditions will be less favorable and/or that volatility in the global commodity and financial markets will be hightened, because of intensifying geopolitical uncertainty and deglobalization.
Meanwhile, some positive scenarios are also likely to materialize. They are primarily related to increased military and financial support from partners and the international community’s efforts to ensure a just and lasting peace for Ukraine.
Monetary conditions continued to ensure the attractiveness of hryvnia assets, although the momentum has weakened. At the same time, they did not impede the development of lending
Since the previous meeting, rates on term hryvnia deposits and domestic government debt securities have remained relatively unchanged, while household inflation expectations have marginally worsened, in particular on the back of the deteorating security situation. This affected the dynamics of term hryvnia deposits, which, although continuing to grow, did so at a slower pace than before.
At the same time, corporate and household hryvnia loans continued to grow at a high pace: more than 30% yoy. In addition, as surveys indicate, banks reported an increase in businesses’ demand for loans and an easing in lending standards, both in previous months and for the next quarter.
The NBU will maintain relatively tight monetary conditions to safeguard the sustainability of the FX market and the attractiveness of hryvnia savings, while also ensuring a steady decline of inflation to its 5% target over the policy horizon.
Given the amplification of pro-inflationary risks, keeping the key policy rate at its current level is appropriate under the current circumstances. This will help support demand for hryvnia savings instruments, keep inflation expectations under control, and safeguard the sustainability of the FX market, which is important for achieving price stability.
The NBU’s baseline scenario for the October macroeconomic forecast assumes that key policy rate cuts will begin in Q1 2026. Should risks to price dynamics materialize and/or intensify, particularly if there are more significant underlying inflationary pressures, the NBU will be ready to postpone the key policy rate cuts. At the same time, a weakening of pro-inflationary risks will signal a move towards an interest rate easing cycle.
The detailed October macroeconomic forecast will be published in the Inflation Report on 30 October 2025.
The decision to keep the key policy rate at 15.5% per annum was approved by NBU Board Decision No. 385-rsh on the key policy rate, dated 23 October 2025, which will take effect on 24 October 2025.
A summary of the discussion by Monetary Policy Committee members that preceded the approval of this decision will be published on 3 November 2025.
The next monetary policy meeting of the NBU Board will be held on 11 December 2025, according to the confirmed and published schedule.