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

Meeting date: 10 September 2025

Attendees: all 10 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
• Yuriy Heletiy, Deputy Governor
• Yaroslav Matuzka, Deputy Governor
• Dmytro Oliinyk, Deputy Governor
• Oleksii Shaban, Deputy Governor
• Pervin Dadashova, Director, Financial Stability Department
• Volodymyr Lepushynskyi, Director, Monetary Policy and Economic Analysis Department
• Oleksandr Arseniuk, Director, Open Market Operations Department
• Yuriy Polovniov, Director, Statistics and Reporting Department.

MPC members discussed the main factors in the easing of price pressures, the distribution of risks to inflation developments, and the monetary conditions necessary for inflation to settle into a trajectory of sustainable decline to the 5% target

Consumer inflation has been declining for three straight months, to 13.2% yoy at the end of August, below the figure in the NBU’s macro forecast (July 2025 Inflation Report), the discussion participants said. Meanwhile, core inflation slowed to 11.4% yoy in August, running close to the forecast trajectory.

Specifically, the arrival of new crops, including vegetables, reduced food inflation tangibly. In August, the harvesting of early grains also picked up, bringing crop yields to last year’s levels and taking expected harvest volumes closer to the NBU’s forecast. This will help curb inflation further and should also increase exports and accelerate economic growth in the coming months.

Pressure on consumer prices also eased as expected, due to an increase in labor supply and a slowdown in real-wage growth (to around 5% yoy in recent months, down from the double digits at the beginning of the year).

Air strikes on energy infrastructure, though more intense, caused no major problems with the power supply. Occasional power outages had no tangible pro-inflation impact. Nor did they dampen economic activity. The resumption of gas extraction and accumulation was in line with the NBU’s assumptions. 

The situation in the foreign-exchange market also remained sustainable, partly due to seasonally better market conditions and measures previously taken by the NBU to ensure interest in hryvnia assets and maintain two-way market-driven fluctuations in the exchange rate. As a result, net FX demand from households was restrained, the hryvnia exchange rate fluctuated moderately with a tendency to appreciate, and exchange rate expectations showed signs of improvement. The volume of NBU interventions declined in August and was more than offset by (USD 5.8 billion in) external aid disbursements. This boosted international reserves by 7% (to USD 46 billion as of early September).

Despite a number of positive aspects, high risks associated with the course and consequences of the war persist. Those include mounting pressure on public finances as the war continues. Fully financing the budget requires not only taking a balanced approach to spending, revenue mobilization, and further steps to de-shadow the economy, but also making progress in negotiations with international partners. A significant portion of external funding for 2026–2027 is awaiting confirmation.

The high intensity of the war continues to considerably restrain investment and generate permanent pressure on production costs, while russia’s terrorist attacks against civilians are prompting them to travel abroad, though not as actively as in previous years. Furthermore, the escalation of attacks against the energy sector ahead of the heating season ramps up risks to both economic activity and inflation developments.  

The fallout from the war can also likely be traced by looking at how inflation expectations behave over time. On the one hand, the general public’s and financial analysts’ outlook on inflation has improved as it cools. On the other hand, most groups of respondents, households included, continue to anticipate double-digit inflation. Inflation-related search queries are showing the public taking sustained strong interest in the topic.

All MPC members favored maintaining the key policy rate at 15.5% in September

The discussion participants agreed that such a step is consistent with the need to maintain the proper attractiveness of hryvnia assets and ensure sustainable FX market conditions while making sure inflation sustainably settles into a declining trajectory. Judging by how the macroeconomic situation has been developing, it is rather close to the baseline scenario of the NBU’s July macro forecast, meaning there are no solid grounds to deviate from the projected trajectory of the key policy rate. Surveys show the majority of polled professionals were expecting the key policy rate to remain unchanged in September and viewing this decision as optimal under current conditions. Such a step by the NBU will therefore be perceived by economic agents as consistent and predictable. 

One MPC member said the current level of monetary conditions is a prudent compromise between the NBU’s goals of ensuring price stability and maintaining economic growth. This is consistent with the principles of flexible inflation targeting. On the one hand, the current level of the key policy rate and the current parameters of monetary policy’s operational design are ensuring that households and specialized investors take a rather keen interest in term hryvnia assets. This is tying up some of the hryvnia liquidity and restraining the demand for foreign exchange, taking some pressure off the hryvnia exchange rate and international reserves. On the other hand, existing monetary conditions are not overly tight, as evidenced by the continued uptrend in lending. Specifically, the portfolio of net hryvnia loans made to the corporate sector has grown a cumulative 24% since early 2025.

The trajectory of inflation deceleration will continue to be steeper than the one outlined in the NBU’s July macro forecast, several discussion participants said. The NBU’s perspective on the future is conventionally based on moderately conservative assumptions, one of these MPC members said. At the same time, the situation turned out to be favorable, particularly in terms of weaker price pressures from production costs and pass-through effects of the hryvnia’s depreciation against the euro that occurred in H1 2025. As a result, headline as well as core inflation is decelerating somewhat faster than expected. The improved harvest will support a sustained downtrend in food inflation in the coming months. The growth in prices for processed foods, particularly sunflower oil, cereals, bread, and bread products, will also decelerate. The decrease in feed prices will help slow the rise in meat prices. Inflationary pressure coming through the import channel will also be limited by convergence between food prices in Ukraine and those in neighboring EU countries, and by sustainable FX market conditions.

On the other hand, several MPC members said it is too early to talk about sustainability of the inflation downtrend, as the impact of disinflationary factors may prove short-lived. There are multiple signs of persistent underlying price pressures. Inflation in processed foods and services, for example, is still running high despite some deceleration. Price increases of more than 10% yoy continue to be observed for over 60% of the consumer basket, a factor that maybe explains the lasting close attention to inflation and the rather sluggish improvement in inflation expectations compared to the pace of disinflation. The persistence of high inflation expectations will impede the disinflationary momentum and reduce the real yield on hryvnia instruments. This will have a direct impact on economic agents’ decisions about investment and savings and will accordingly limit room for easing interest rate policy.

Factors that have been holding back inflation in recent months are having a relatively fleeting impact, while medium- and long-term pro-inflation risks are looming larger, one of these participants said. These are primarily war risks, including the consequences of destruction from air strikes and the emergence of additional budgetary needs to maintain defense capabilities. Materialization of these risks will impede the slowdown in inflation. The NBU should therefore continue to be moderately conservative in its actions until there is more clarity on a potential new program with the IMF and the volume and regularity of international financial aid inflows in 2026–2027.

Another MPC member concurred with this line of argument, adding that a build-up of imbalances between labor supply and demand is also a significant risk. Business outlook surveys have shown that the shortage of workers remains a considerable drag on economic activity, and that the annual growth rate of labor supply slowed in August from June and July. News outlets have recently reported a pickup in outbound migration, especially among young people. The ratcheting up of massive air strikes against civilian targets and energy facilities may also compel more and more people to depart. All of this can affect the situation in the labor market, then the costs of running a business, and eventually the dynamics of consumer prices.

Several MPC members also highlighted additional balance-of-payments risks facing the FX market and inflation developments. On the one hand, we could expect a narrowing of the goods trade deficit in Q4 as harvesting gathers pace. What is more, official financing volumes are seen to remain high in the months ahead. On the other hand, the risk of exports declining as more attacks hit energy infrastructure and facilities remains high while imports, especially of machine-building products to meet military needs and repair infrastructure, are steadily growing. This is a protracted tendency that will continue to affect both economic and inflation developments for a long time to come, one of these MPC members said. Which means that NBU decisions should continue to aim to conserve international reserves at a sufficient level to maintain macrofinancial stability.

This distribution of risks prompted the discussion participants to agree that high uncertainty persists and that the NBU should watch carefully how things unfold. Although the situation is currently following the NBU’s July macro forecast rather closely, the NBU must be ready to respond flexibly to changes in the breakdown of risks. To minimize the risk of a policy reversal that could undermine confidence among economic agents, the central bank should proceed with caution and without relying on overly optimistic assumptions. Confidence is an extremely valuable asset, particularly in wartime.

MPC members agreed there is a certain amount of room for cuts to the key policy rate going forward, but differed on the pace of and overall potential for an easing of interest rate policy

The discussion participants concurred that if inflation keeps trending down, inflation expectations continue to improve, the FX market situation remains sustainable, and no significant adverse changes occur to the balance of risks, the NBU will be able to begin to cautiously reduce the key policy rate in Q4 2025.

However, there was a difference of opinion over the speed of and potential for taking steps to ease interest rate policy. Most MPC members said the situation is currently developing quite close to expectations, and that the trajectory of the key policy rate outlined in the July forecast – 14.5% by the end of 2025 and 12.5% ​​by the end of 2026 – is therefore sustainable.

But several MPC members said that risks associated with the war and high budgetary needs have intensified and actually partially materialized. This may not only slow the pace of rate cuts at the end of 2025, but also limit the space for loosening interest rate policy in 2026. At the end of next year, the key policy rate will likely be 13%–14%, these participants said.

Only one MPC member said the NBU will be able to ease interest rate policy faster than the July macro forecast projects. Further deliveries of new crops and more moderate exchange rate pass-through effects will pave the way for a faster-than-expected decline in inflation, this participant said. The NBU will be able to leverage such a favorable environment to support economic growth without compromising price stability.