Meeting date: 18 March 2026.
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, 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 reviewed current price dynamics and the status of inflation expectations, and discussed changes in the distribution of risks, which have intensified and may require that the NBU pursue a tighter-than-expected interest rate policy in order to moderate inflation this year and keep it on track to reach its 5% target
Actual price developments at the beginning of 2026 were close to the NBU’s forecast (January 2026 Inflation Report), the MPC members said. Specifically, headline inflation in February (7.6% yoy) was running only slightly higher than projected (7.4% yoy), while core inflation was fully in line with the forecast trajectory (7.0% yoy).
Most groups of economic agents retained relatively sustainable inflation expectations in February. However, households’ inflation expectations deteriorated significantly, likely due to tangible energy shortages at the beginning of the year, a more noticeable increase in prices for a number of consumer staples, and exchange-rate volatility in previous months.
In early March, risks to inflation dynamics were up considerably, driven for the most part by hostilities in the Middle East. The surge in global energy prices quickly fed into higher fuel prices in Ukraine. Meanwhile, pressure on the hryvnia’s exchange rate to depreciate against the U.S. dollar intensified, but relative to the euro and other currencies of Ukraine’s main trading partners, the rate was little changed. Risks of international financing inflows arriving with less regularity and shrinking in size edged higher.
MPC members unanimously supported holding the key policy rate steady at 15% in March
The discussion participants agreed the NBU should hold back on easing its interest rate policy in the face of rising inflationary risks, worsening household expectations, and elevated uncertainty over future economic consequences of the war in the Middle East. Although actual inflation is close to the NBU’s forecast, risks of inflation deviating from its projected trajectory in the coming months are significant. Holding the key policy rate at 15% should help maintain the attractiveness of hryvnia instruments, ensure the sustainability of the FX market, and minimize the risks of inflation expectations becoming unanchored. This, in turn, will help keep inflation processes under control.
The war in the Middle East poses tangible threats to inflation dynamics in Ukraine, several participants said. Even if hostilities were to die down quickly, energy prices would likely stick to higher levels than projected in the January forecast, including due to destruction of energy infrastructure across the Gulf states. Price increases for petroleum products and natural gas, through direct and second-round effects, may affect the prices of a wide range of goods and services in Ukraine.
What is more, the complexity of logistics in the Strait of Hormuz, a vital shipping lane that also facilitates fertilizer traffic, could become a source of additional pressure on farmers’ production costs and therefore on food prices. External price pressures will also intensify due to rising inflation in trading-partner countries.
Another participant said the increase in buckwheat prices caused by last year’s low harvest will contribute to the pickup in inflation this year. Another factor worth considering is the 1.1 multiplier that tobacco manufacturers and importers will have to apply to calculate their minimum excise tax liability from 1 April.
One MPC member said the spike in prices for energy commodities that make up a significant share of Ukrainian imports will also fuel additional demand for foreign exchange and thus exert more pressure on the FX market and international reserves. Meantime, the war in the Middle East may distract the international community and degrade its ability to provide military and financial support to Ukraine as it fights back against russian aggression. Moreover, higher energy prices will expand russia’s capacity to continue the war, deepening the adverse consequences for inflation and economic development in Ukraine, including through further damage to infrastructure and via the persistence of worker shortages in the labor market.
Another MPC member drew attention to risks for the adequacy and regularity of international assistance inflows. The timeline for aid disbursements is already shifting away from what the NBU’s January forecast assumed, this participant said.
Most of these threats, another participant said, are currently hypothetical and may never materialize, yet under existing conditions, the NBU should pursue a prudent approach and assess the totality of changes in the balance of risks to inflation when revising the macro forecast in April. Most other central banks are also taking a pause to estimate a potential fallout from the war in the Middle East, this MPC member said. The NBU’s prudent approach will also meet the expectations of most financial market participants, who surveys show deem it feasible to hold the key policy rate unchanged in March.
Another MPC member said that with geopolitical uncertainty mounting and exchange-rate and inflation expectations deteriorating, commercial banks themselves have also primarily avoided cutting rates on hryvnia deposits, apparently anticipating that the NBU will put the easing cycle of interest rate policy on hold. Under such circumstances, holding the key policy rate steady should send the market a clear signal that the NBU is willing to support the market’s appetite for hryvnia assets and thus restrain the pressure on the FX market. Such a decision would also appear forward-looking by making room for a potential policy reversal if risks were to materialize and intensify going forward.
Another MPC member concurred with this perspective, saying that although demand for hryvnia assets has been rather brisk in recent months, one should keep in mind that the real yield on these instruments has declined as inflation expectations have worsened and FX demand has ticked up since early March. At this time, the NBU should avoid moves that could deepen such trends. The preferred course of action, this participant said, is to wait until a thorough revision of the forecast is made in April and see whether hryvnia assets remain attractive and international aid inflows regular, as these are vital prerequisites for the FX market’s sustainability.
Most MPC members expect a more prudent interest rate policy in 2026 compared to the NBU’s January forecast
Given recent global events and increased risks to domestic price dynamics, the NBU will likely have to act more prudently than projected in the January forecast, most participants said. Specifically, seven MPC members said there is a chance the key policy rate will stay where it is until at least the end of 2026. One MPC member said an actual tightening of interest rate policy is also on the table.
By contrast, three MPC members said that if the Middle East situation clears up rather quickly and utility tariffs do not change, the inflation trajectory may remain close to January’s macro forecast. This is a scenario where the NBU has wiggle room to take one or two prudent steps to cut the key policy rate in 2026.
All MPC members agreed that the surge in uncertainty over the past month has made macroeconomic forecasting considerably more complicated, especially the forecasting of key policy rate dynamics. Because the situation is in flux, the NBU must continue to respond flexibly to both current trends and changes in the distribution of risks to price developments, the FX market, and inflation expectations.
The Monetary Policy Committee (MPC) is an NBU advisory body that was created to share information and opinions on monetary policy formulation and implementation in order to deliver price stability. The MPC comprises the NBU Governor, NBU Board members, and directors of the Monetary Policy and Economic Analysis Department, Open Market Operations Department, Financial Stability Department, and Statistics and Reporting Department. The MPC convenes the day before the NBU Board’s meeting on monetary policy issues.
Decisions on monetary policy issues are made by the NBU Board