The National Bank of Ukraine (NBU) kept the key policy rate unchanged at 15.5% for a fourth time in a row on September 11, citing persistent inflationary pressures despite a clear downward trend in consumer price growth, UBN reports. (chart)

"Inflation is fixed on a downward trajectory, but is still high," the central bank stated, noting that the annual inflation rate stood at 13.2% in August.

According to the NBU, the recent slowdown in inflation has been driven by several factors. The arrival of the new agricultural harvest has helped curb the rise in raw material prices, leading to slower increases in processed food prices. In addition, improvements in the labour market and policy measures by the NBU contributed to a decline in core inflation, which fell to 11.4% y/y. Core inflation excludes volatile components such as food and energy.

The central bank highlighted that labour supply has been rising, with a narrowing gap between job seekers’ wage expectations and actual salaries, easing wage-related inflationary pressures.

In its July macroeconomic forecast, the NBU projected that it would begin cutting the discount rate in the fourth quarter of 2025. However, it warned that external and domestic risks could delay the start of the easing cycle.

“If pro-inflationary risks such as an escalation of hostilities, increased shelling and destruction, or additional government expenditures materialise or intensify, [the NBU] will be prepared to delay the rate reduction and, if necessary, take further measures,” the bank said.

The NBU has kept interest rates elevated since Russia’s full-scale invasion in February 2022 in an effort to stabilise the economy, preserve exchange rate stability, and contain inflation expectations.

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