Ukraine Interest Rate

The National Bank of Ukraine raised its key policy rate by 100 basis points to 14.5% during its meeting on January 23, 2025, bringing borrowing costs to their highest level since early 2024. This second consecutive rate hike aims to stabilize the foreign exchange market, manage inflation expectations, and reduce inflation toward the 5% target. Inflation, which has been rising since May 2024, reached 12% in December, and is expected to peak in the second quarter of 2025 before slowing. Inflation is forecast to drop to 8.4% by the end of 2025, with a return to the 5% target in 2026. Policymakers also acknowledged that the ongoing war with Russia is hindering Ukraine’s recovery, with GDP growth projected to slow to 3.4% in 2024, down from 5.3% in 2023. The 2025 GDP forecast was revised down to 3.6% from 4.6%. The central bank indicated it may continue tightening policy if inflationary pressures persist.