Summary of Key Policy Rate Discussion by NBU Monetary Policy Committee on 28 January 2026

Meeting date: 28 January 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, 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 revised macro forecast, changes in the distribution of risks to price dynamics and economic development, and monetary conditions that are consistent with bringing inflation to its 5% target over the policy horizon while supporting the recovery of economic activity

In December, both consumer and core inflation slowed to 8% yoy due to the effects of higher crop harvests and weaker pressures in the labor market. Monetary policy measures aimed at maintaining interest in hryvnia assets and preserving the sustainability of the FX market also contributed to disinflation. Specifically, the policy of holding the key policy rate steady in previous months  has prevented a decrease in interest rates on, and fueled the demand for, hryvnia savings instruments. This restrained the seasonal uptick in the pressure on the FX market and therefore on consumer prices. Inflation continued to trend down in January, the NBU estimates. However, inflation expectations of economic agents remain elevated.

Since the previous macro forecast (October 2025 Inflation Report), the breakdown of risks to price dynamics has also undergone tangible changes. On the one hand, the risk of external financing being insufficient has significantly subsided, including thanks to the EU Council’s decision to allocate EUR 90 billion in financial support to Ukraine in 2026–2027. On the other hand, the consequences of russia’s massive air strikes against Ukraine’s energy infrastructure forced the NBU to revise up its assumptions about power shortages. The update has affected the forecasts for inflation and GDP (January 2026 Inflation Report). The new forecast assumes a somewhat more moderate decline in inflation and therefore a more restrained easing of the NBU’s interest rate policy than previously anticipated.

Eight MPC members called for cutting the key policy rate to 15% in January

These discussion participants said the sustained slowdown in inflation, the significant reduction in risks to the adequacy of external financing, and the robust demand for hryvnia instruments are signaling an opportunity to launch an easing cycle of interest rate policy. But the NBU should act prudently, they said, given the still heightened inflation expectations, the tense security situation, and the impact of large-scale damage sustained by the energy sector on consumer prices via both market-based and administered mechanisms. Under such conditions, starting a cycle of interest rate cuts will be consistent with bringing inflation to its 5% target within the policy horizon and will support the economy.

In making monetary decisions under high uncertainty, it is important to take a balanced approach by considering both current changes in indicators and the distribution of expected risks, one of these MPC members said. Existing trends are overall favorable. Specifically, both headline and core inflation have since June 2025 been sustainably decelerating in a downtrend that the revised macro forecast says will continue in the coming months. Eventually, the disinflationary trend’s persistence will likely bring about a decrease in inflation expectations. Despite certain seasonal fluctuations in the exchange rate, the FX market remains sustainable, households’ demand for foreign exchange is significantly lower than in the same period last year, and international reserves are at an all-time high. Hryvnia instruments are in demand: inflows of funding from households into term deposits and hryvnia domestic government debt securities rose considerably at the end of the year. All of this indicates that prerequisites are in place for easing the interest rate policy, a move that would match the October forecast and the NBU’s forward guidance and would therefore be fully in line with market participants’ expectations.

The NBU should nonetheless act prudently, in part due to potential pro-inflation effects from the massive destruction inflicted on the energy sector amid a projected gradual fading of the disinflationary impact from last year’s ample harvests. The first signs of inflationary pressure building up are already here. In particular, the NBU’s January nowcast shows a deterioration in the monthly developments of annualized gains in both consumer and core inflation. Which means a further cooling of year-on-year inflation is likely to be more subdued.

The list of risks to price dynamics is not limited to the fallout from russian strikes against energy infrastructure and logistics, another participant said. Risks that budget expenditures on defense and reconstruction may rise are also rather high. The budget deficit of 19% of GDP planned for 2026 is significantly lower than in previous years, meaning there is a high probability of it widening during the year, with higher expenditures having a proportionate inflationary impact. Moreover, the labor market is exerting persistent pressure on prices through adverse migration trends, which have slightly picked up in recent months. Risks associated with external financial assistance, particularly in terms of regularity of its inflows, cannot entirely be dismissed.

Another MPC member said the NBU should retain its focus on the issue of proper attractiveness of hryvnia instruments. People’s propensity to park their savings in the hryvnia remains at a portfolio-effect level, the purpose being to maintain a stable term structure of savings. This is evidenced by the lack of change in retail term deposits as a share of households’ hryvnia deposits in banks. The revival of appetite for hryvnia instruments at the end of the year, this participant said, may have been temporary, fueled primarily by an urge to maximize income before rates are cut. Specifically, judging by the dynamics of high-frequency indicators, some banks began reducing rates on longer-term deposits in January already. Which means a key policy rate cut will not take long to pass through to rates on hryvnia instruments. This insight speaks in favor of taking a justified approach to key policy rate reductions, so that the attractiveness of hryvnia instruments is preserved.

Another participant in the discussion agreed, saying a 0.5 pp cut to the key policy rate currently looks like the most prudent course of action to take. On the one hand, such a step would signal that the NBU continues to focus on bringing inflation further down over the policy horizon. On the other hand, the launch of an interest rate policy easing cycle will clearly signal an improved risk distribution and the NBU’s readiness to help revive lending further and shore up the economy’s capacity to adjust to extraordinary wartime conditions.

Two MPC members proposed to cut the key policy rate to 14.5% in January

The NBU can afford to be more decisive in easing its interest rate policy, as the slowdown in inflation is sustained, significant, and running ahead of the NBU’s previous forecasts, these participants said. The decrease in risks of external financing turning out insufficient, they said, provides reassurance that the NBU is able to maintain the sustainability of the FX market and steer inflation toward its 5% target.

The decline in inflation will continue in H1 2026, driven by disinflationary second-round effects from last year’s higher harvests, one of these MPC members said. In H2, inflation is seen to marginally accelerate against the backdrop of last year’s low comparison base and the impact of damage taken by the energy sector. However, inflation will still be lower than in 2025, exerting limited pressure on inflation expectations.

There is no risk of investors losing interest in hryvnia assets even if their market rates decline by an equivalent 1 pp in response to the key policy rate cut, another MPC member said. The yield on hryvnia instruments will remain high enough to make up for the projected rate of inflation, this participant said. Confidence in the continued attractiveness of hryvnia assets is also reinforced by the fact that hryvnia deposits are in demand, even those offered by banks touting below-market-average yields.

Therefore, these MPC members said, the NBU can already reduce the key policy rate more materially than projected in the previous forecast, without putting at risk the FX market and inflationary processes. Such a step would have a more pronounced signaling effect that would be timely given the need to support business lending amid massive destruction of infrastructure and persistence of adverse migration trends, these participants said.

One MPC member spoke in favor of holding the key policy rate steady at 15.5%

The upward revision of the inflation forecast for 2026 and high inflation expectations indicate there are tangible threats to price dynamics, this participant said. The NBU should take it as a clear sign that it is feasible to postpone the easing cycle of interest rate policy, this MPC member said. This participant expressed concern that inflation expectations are still elevated. However, achieving the inflation target later than was anticipated in October is unlikely to help improve expectations.

Under such circumstances, keeping the key policy rate unchanged, this MPC member said, will reaffirm the NBU’s commitment to pursue its primary mandate of ensuring price stability and will have a positive effect on economic agents’ expectations and confidence in the hryvnia. In particular, holding the key policy rate steady will support the attractiveness of hryvnia instruments. This will simplify the NBU’s task of ensuring the sustainability of the FX market. In addition, such a decision would minimize risks of a policy reversal if pro-inflation risks materialize. Ensuring price stability would be the NBU’s best contribution to sustainable economic growth, this participant said.

Although all MPC members expressed an expectation for the NBU to ease its interest rate policy further, they differed over the speed of key policy rate reductions

Most participants said there is currently limited room to ease interest rate policy in 2026 given the still elevated inflation expectations and the upward shift in the distribution of risks to price developments. These risks are in part related to the consequences of large-scale damage done to the energy sector and the likelihood of additional budgetary expenditures on recovery projects and defense capabilities. If the inflation risk landscape does not improve, the NBU may have to limit itself to taking just a few steps to reduce the key policy rate to 14.5% in 2026, these MPC members said.

Several other participants said risks to price dynamics and expectations are relatively balanced. The pro-inflation impact of energy sector disruptions is being offset by other factors, such as the lingering effects of ampler harvests, a certain cooling of consumer demand amid power outages, and the strengthening of the NBU’s capacity to ensure the sustainability of the FX market, they said. Inflation in 2026 may therefore come out lower than projected, enabling the NBU to support economic activity by significantly reducing the key policy rate, to 12.5%–13.5%, these members said.

Meanwhile, all participants agreed that the NBU should continue to respond flexibly to changes in the actual situation and the risk distribution. If threats to price dynamics intensify, the NBU should halt the easing of policy and stand ready to take additional measures to keep inflation processes under control. But if inflation risks ease, the NBU should not delay accelerated key policy rate cuts in order to support economic recovery.