The National Bank of Ukraine (NBU) raised its key policy rate to 15.5% from 15% on July 30, ending a hold that had lasted since March and reversing the rate-cutting cycle it opened at the start of the year, the central bank said. (chart)

The move catches the market somewhat off guard. As recently as July 15, analysts had expected the NBU to hold the rate at 15% until at least the first quarter of 2027, and the reversal comes barely six months after the central bank cut the rate to 15% in January, describing it as the start of a new monetary-easing cycle. That the NBU has now had to reverse course before that cycle even resumed says more about how quickly Ukraine's inflation outlook has deteriorated than the size of the move itself.

The bank cited a steady build-up in underlying price pressure and a stronger expected acceleration of headline inflation by year-end. It said it remained ready to tighten policy further if needed to contain inflation, and expects the higher rate to support demand for hryvnia assets, anchor inflation expectations and maintain stability in the foreign-exchange market.

Demand for hryvnia assets has held up well this year, the NBU said, helped by the timely suspension of the rate-cutting cycle in March and by keeping the rate at 15% in the months since; Ukrainians have continued to add to both hryvnia term deposits and government bonds. The central bank does not expect the hike to meaningfully slow lending, which is growing more than 30% a year and should keep expanding on the back of bank competition for strong borrowers, ample system liquidity, and state and international incentive programmes.

The rate has now round-tripped back to where it stood as recently as March 2025, when the NBU last raised it to 15.5% during an earlier bout of price pressure, before cutting to 15% this January.