The National Bank of Ukraine remains committed to its inflation targeting regime. However, now that the forced administrative restrictions are in place, market-based monetary instruments such as the key policy rate no longer play a significant role in the operation of the monetary and FX markets.
With this in mind, the central bank has postponed its key policy rate decision. The key policy rate will therefore stay unchanged at 10%.
When economic conditions go back to normal, the NBU will resume its regular Board meetings on monetary issues and continue to make key policy rate decisions and publish the Inflation Report and macroeconomic forecasts.
The NBU will use the key policy rate and other monetary instruments to control inflation expectations and pursue the inflation target when monetary transmission channels go back into operation and it becomes possible to calculate, with reasonable probability, the impact of monetary decisions over the policy horizon.
After Ukraine is freed from Russian invaders and the economy is back to operating on market-driven principles, the NBU will return to its traditional inflation-targeting mode with a floating exchange rate. The business-as-usual functioning of the FX market will be restored as soon as possible, and the FX restrictions will be eased to pre-war levels. However, this may take several stages.