Ukraine's Central Bank Maintains Discount Rate Amidst Economic Pressures

Strategic Insights -

The National Bank of Ukraine (NBU), led by Governor Andriy Pyshny, announced that it will maintain the discount rate at 15.5 percent to support the stability of the foreign exchange market and manage inflation expectations. This decision is a response to the country's ongoing economic challenges, including a rapid increase in food prices and significant business spending on raw materials and labor. Despite inflation peaking at 14.3 percent year-on-year in May, core inflation has slowed down to 12.1 percent, indicating a moderate decline. The NBU expects inflation to enter a trajectory of sustained deceleration in the coming months, but revised its forecast trajectory towards a slower decline due to adverse weather conditions and the impacts of the war.

Key Takeaways:

  • The NBU will maintain the discount rate at 15.5 percent to support the foreign exchange market and control inflation expectations.
  • Inflation peaked at 14.3 percent year-on-year in May, but core inflation has slowed down to 12.1 percent.
  • The NBU expects inflation to enter a trajectory of sustained deceleration in the coming months, with a revised forecast trajectory towards a slower decline.
  • The econmomy is expected to recover at a slower pace than last year, with real GDP growth forecasted at 2.1 percent in 2025.
  • The NBU's baseline forecast scenario envisages economic growth at the level of 2-3 percent in 2026-2027, depending on the course of the war.

Statistics:

  • Inflation rate: 14.3 percent year-on-year in May, 12.1 percent core inflation rate.
  • Discount rate: 15.5 percent.
  • Real GDP growth forecast: 2.1 percent in 2025.
  • Inflation forecast trajectory: 9.7 percent in 2025, 6.6 percent in 2026, and 5 percent in 2027.

Sources:

  • "Andriy Pyshny, Governor of the National Bank of Ukraine, Press Briefing on Monetary Policy Decisions"
  • National Bank of Ukraine (NBU)