Summary of Key Policy Rate Discussion by NBU Monetary Policy Committee on 10 December 2025

Meeting date: 10 December 2025.

Attendees: all 11 members of the Monetary Policy Committee (MPC) of the National Bank of Ukraine:

• Andriy Pyshnyy, Governor of the National Bank of Ukraine
• Sergiy Nikolaychuk, First Deputy Governor
• Volodymyr Lepushynskyi, Deputy Governor
• Yuriy Heletiy, Deputy Governor
• Yaroslav Matuzka, Deputy Governor
• Dmytro Oliinyk, Deputy Governor
• Oleksii Shaban, Deputy Governor
• Mykhailo Rebryk, Acting Director, Monetary Policy and Economic Analysis Department
• Pervin Dadashova, Director, Financial Stability Department
• Oleksandr Arseniuk, Director, Open Market Operations Department
• Yuriy Polovniov, Director, Statistics and Reporting Department.

MPC members discussed the main factors behind the current slowdown in inflation, and risks to further price developments, especially risks associated with official financing for the upcoming years and with the war’s consequences

The decrease in consumer inflation continued to run slightly above the NBU’s forecast (October 2025 Inflation Report), the MPC members said. In November, both consumer and core inflation slowed to 9.3% yoy. The slowdown was primarily driven by an increase in food supply. Through second-round effects, the arrival of newly harvested crops also contributed to processed foods disinflation. The NBU’s measures to ensure the attractiveness of hryvnia savings and maintain the sustainability of the FX market contributed to the weakening of underlying price pressures. A certain easing of labor market mismatches also had a positive impact, expanding the supply of labor and slowing the growth in real wages.

Despite the steady tangible cooling of inflation that has been ongoing since June, inflation expectations of most groups of economic agents remained elevated. Financial analysts were the only group with expectations relatively close to the NBU’s forecast. Other groups of respondents continued to anticipate double-digit inflation. In some groups, inflation expectations had actually turned marginally worse over the past few months. A trend indicator based on search-query data also suggested that households were getting increasingly more inflation-conscious.

The difficult security situation continued to generate risks to price stability and economic recovery sustainability. In recent months, russia has noticeably ratcheted up its air strikes against Ukraine’s energy infrastructure, especially in the frontline areas. In November, these attacks damaged large thermal-power and hydropower facilities. The enemy also pushed forward with strikes at gas extraction and storage facilities, as well as at manufacturing and logistical capacities, including port infrastructure logistics. These assaults not only dampened economic activity in a number of regions and industries, but also exerted heavy pressure on businesses’ production costs to go up. Due to the shortage caused by damage to energy infrastructure, average monthly wholesale power prices rose to all-time highs in the fall. Protracted power outages and intensified strikes against civilian infrastructure also ramped up risks of migration rising and labor market problems becoming worse.

In addition, uncertainty over the parameters of external assistance in 2026–2027 persisted. A reparations loan that would be backed by frozen russian assets is seen to be a significant source of external assistance. However, the implementation of such a mechanism requires that multiple decisions be made at political and technical levels. Negotiations are ongoing. Although Ukraine has accumulated a margin of safety to keep the macrofinancial situation sustainable for a relatively long time, an appropriate monetary policy response action will have to be taken if the risk of external assistance running low or being disbursed at irregular intervals materializes in the upcoming years. If this were to happen, it would among other things considerably constrain the NBU’s capacity to ease interest rate policy and, in less favorable circumstances, could even require its tightening to maintain macrofinancial stability.

Ten MPC members called for holding the key policy rate steady at 15.5% in December

They agreed that in the face of high inflationary risks, especially ones associated with the war and uncertainty over international assistance parameters, the NBU should maintain its key policy rate at 15.5% to keep hryvnia instruments attractive, the FX market sustainable, and expectations controlled in order to bring inflation to its 5% target.

One participant said that if the NBU had been focused exclusively on actual macroeconomic data, without regard for changes in the balance of risks, it would have had sufficient grounds to lower the key policy rate as early as October. But current favorable trends are overshadowed by the lack of final decisions on the volume and schedule of external funding for 2026–2027. The unresolved nature of these issues feeds into uncertainty in multiple areas. A reckless cut to the key policy rate could warrant a policy reversal if risks materialize. Such an about-face would adversely affect confidence in NBU actions, requiring compensatory measures in the form of tighter monetary policy than could otherwise have been pursued. For now, it is therefore feasible for the NBU to take a wait-and-see stance until negotiations with international partners make progress.

Another MPC member sided with this perspective, describing the lack of clarity over the parameters of future official financing as an elephant in the room, a risk so substantial it cannot be disregarded when making monetary decisions. A premature cut to the key policy rate could make hryvnia instruments less attractive and put more pressure on the hryvnia exchange rate and international reserves, which provide a cushion against potential delays in external financing next year, this MPC member said.  To avoid such a scenario, the NBU should keep interest rates at current levels.

Another participant agreed, pointing out that the decision to hold the key policy rate steady at 15.5% in October bolstered the real return on hryvnia instruments. As a result, funds inflows into term deposits and hryvnia-denominated domestic government debt securities actually edged higher. The NBU should nonetheless continue to keep a watchful eye, this MPC member said, as appetite for term savings instruments remains unchanged: interest in hryvnia assets is largely still at the “portfolio effect” level, where investors maintain a relatively stable term structure of savings in order to diversify risks. This is evidenced by zero change, over a long time, in retail term deposits as a share of hryvnia deposits. Nor can it be ruled out that inflation expectations, elevated as they already are, may still react to seasonal pressure on the hryvnia exchange rate at the end of the year and/or to the materialization of other pro-inflation risks. Under such conditions, an easing of interest rate policy by the NBU that translates into lower market rates will cause a drop in the real return on hryvnia instruments. Such an outcome could trigger a partial flight of households’ hryvnia liquidity into FX assets. It is therefore better for the NBU to refrain from lowering its key policy rate for the time being in order to maintain the attractiveness of hryvnia instruments and restrain pressure on the FX market.

One MPC member also said that inflation is losing speed, dragged down by a potentially temporary factor – the arrival of newly harvested crops. However, despite a certain slowdown, price increases for services and processed foods are still rapid in annual terms, reflecting a persistent influence of underlying factors. Moreover, prices remain under significant pressure coming through the consumer demand channel. Uncertainty about external financing is thus not the only driver of pro-inflation risks. Among other things, this participant said, we should expect to see rather heavy underlying price pressures in 2026 as energy deficits return and drive an increase in the cost of power to enterprises. So, even if the issue of official financing is resolved in Ukraine’s favor, these factors will continue to exert significant inflationary pressure. All of the above, this MPC member said, provides an additional argument in favor of the NBU taking a wait-and-see approach until  positive shifts occur in the distribution of inflation risks.

Based on these arguments, these participants agreed that the current parameters of interest rate policy – the level of the key policy rate as well as of other rates on NBU transactions with banks – are at this time optimal for achieving the NBU’s main policy objectives under the flexible-IT regime. On the one hand, monetary policy remains tight enough to support demand for hryvnia instruments, limiting pressure on the hryvnia exchange rate and prices. On the other hand, savings incentives are not impeding the steady growth in lending, which is contributing to economic recovery. The cumulative growth in the net hryvnia corporate loan portfolio is about 33% year to date, and above 35% yoy. Moreover, this lending pace could potentially fuel additional inflationary pressure going forward.

Several participants also said that a decision to keep the key policy rate at 15.5% would seem completely consistent with the October forecast and the NBU’s previous forward guidance. It is also consistent with the expectations of financial market participants, according to recent surveys.

One MPC member spoke in favor of lowering the key policy rate to 15% in December

This participant said that the persistence of a sustainable inflation downtrend that is slightly outrunning the NBU’s forecast, especially as far as core components of inflation are concerned, makes a strong case for a prudent easing of interest rate policy. The risks of external assistance becoming insufficient and/or disrupted should therefore be met with a response only when actually materialized, this MPC member said.

A significant slowing of the annualized seasonally adjusted monthly increases in the core CPI, as well as in services inflation, is evidence that underlying inflationary pressures are subsiding,  this participant said. Despite the seasonal depreciation of the exchange rate, the FX market situation remains quite sustainable and is not threatening to disrupt the slowdown in inflation. There is every chance that its decline will continue to outpace the NBU’s forecast.

If the status quo is maintained, the key policy rate will gradually rise in real terms, this MPC member said. Given the likely deterioration in business sentiment and the subdued business activity (including due to strikes against Ukrainian companies and infrastructure), such a tightening of monetary conditions may prove excessive. A prudent reduction in the key policy rate will therefore present no threats to the FX market and international reserves.

The NBU has a high capacity to continue to ensure the sustainability of the FX market and maintain confidence in the hryvnia, and the government has the capability to finance critical budget expenditures, this MPC member said. Both the NBU and the government also have the appropriate experience and toolkit to handle this, as they already went through a similar stage in early 2024. That year, the situation in the FX market remained controlled, and the banking system kept operating smoothly.

MPC members expect the NBU to ease its interest rate policy in 2026, provided that pro-inflation risks, primarily those related to external financing parameters, decline

The participants expect that the risks associated with the adequacy and regularity of external financing disbursements will subside, allowing the NBU to launch a cycle of key policy rate cuts.

Eight MPC members said the key policy rate will be 12.5% at the end of 2026, in line with the NBU’s October forecast. Most of these participants said that in wartime, the balance of risks to inflation and to the key policy rate trajectory is shifted upward, and that they cannot rule out a scenario where interest rate policy becomes tighter than currently projected.

By contrast, three participants said they were confident that inflationary risks associated with the fallout from the war will continue to significantly restrain wiggle room for key policy rate reductions. Accordingly, to keep expectations in check, the NBU will be forced to pursue a tighter interest rate policy than projected in its October forecast. The key policy rate, though likely to edge lower, will still be in the range of 13%–14% at the end of 2026, these MPC members pointed out.

That being said, the participants agreed that the NBU should continue to act flexibly and base its decisions on both actual data and changes in the landscape of main risks to price stability. If inflationary risks abate, the NBU will have room to lower the key policy rate. However, if risks persist or actually intensify, the NBU stands ready to maintain rates at their current levels and take additional steps as needed.