Ukraine Raises Rate by 0.5 Point to 16.5% as Inflation Accelerates in September
Key Facts
Ukraine’s National Bank raised its key rate by 0.5 percentage point to 16.5% annually, with the decision taking effect on October 30, 2026, Interfax-Ukraine reported. The decision was made on October 29 as headline and core inflation accelerated in September, while the bank said the move aims to curb pressure in the foreign exchange market. This is the third consecutive increase since rate hikes began in July, according to the agency’s correction to its coverage of the decision. The move reflects the bank’s effort to contain the effects of price increases linked to wartime conditions while supporting the appeal of hryvnia-denominated assets. The bank said the policy path will remain tied to developments, particularly the impact of Russian attacks on inflation and economic activity.
Headline inflation accelerated to 10% year on year in September, while core inflation rose to 8.8%, according to the bank, as reported by Interfax-Ukraine. The headline reading came as prices faced pressure from rising fuel costs linked to the Middle East war. The bank also attributed the pressure to an escalation in Russian attacks on storage facilities and logistics, adding to the burden on prices and the economy. These factors combine energy costs with disruption to infrastructure, as the bank seeks to limit the pass-through of pressure to the foreign exchange market. The bank therefore raised rates for the third time since July in an effort to support the local currency and ease pressure on the market.
The bank said pressure in the foreign exchange market had intensified as exports declined and the outlook deteriorated amid Russian attacks, and that the current decision aims to curb that pressure. Falling exports add pressure to the currency market alongside the impact of attacks on storage and logistics facilities. By contrast, the bank said earlier monetary tightening had supported the appeal of hryvnia-denominated assets. Large banks have also begun raising rates on hryvnia deposits, according to the bank as reported by Interfax-Ukraine. This shows the impact of tighter policy feeding through to domestic deposit yields as the bank seeks to ease pressure in the foreign exchange market and boost the appeal of assets in the national currency.
The bank’s projections in January 2026 pointed to inflation falling to 7.5% in 2026, then to 6% in 2027, reaching the 5% target in 2028. Those estimates preceded the revision of the October projections, according to the bank’s January monetary policy decision’s key messages. In its first-quarter 2026 report, the bank forecast real GDP growth of 1.8% in 2026, followed by growth accelerating to around 3%–4% in 2027–2028. The report linked foreign exchange market sustainability to the availability of external assistance and forecast international reserves of $65 billion at the end of 2026. These earlier projections provide a backdrop on inflation, growth and reserves for the current decision, while the bank has indicated that the impact of attacks on inflation and economic activity will shape policy adjustments.
The bank expects to keep the rate at 16.5% through the second quarter of 2027, with policy adjusted in line with actual developments, particularly the consequences of Russian attacks for inflation and economic activity. Minutes of the Monetary Policy Committee’s discussion of the rate increase are scheduled for publication on November 9, 2026, Interfax-Ukraine reported. The bank council’s next meeting on monetary policy is scheduled for December 17, 2026. The upcoming minutes will provide details of the committee’s discussion of the decision ahead of the meeting that will review monetary policy in December. The forecast that the rate will remain unchanged through the second quarter of 2027 remains conditional on developments, according to the source’s report of the bank’s position.