Ukraine: National Bank of Ukraine starts easing in January
Bank cuts by 50 basis points: At its meeting on 29 January, the National Bank of Ukraine (NBU) decided to cut the key policy rate by 50 basis points from 15.50% to 15.00%. January’s reduction was the first move since the NBU hiked rates in March 2025 to curb inflation and the first cut since June 2024.
Lower inflation and financing uncertainty drive the move: In recent months, uncertainty over external funding and stubborn inflation have constrained the Central Bank’s room for maneuver. These risks have partially receded: In January, the EU pledged EUR 90 billion in loans to support Kyiv, and inflation has declined since May 2025, reaching a 16-month low in December amid a strong harvest and a relative decline in pressures on the labor market. That said, the Bank refrained from a steeper cut, as inflation is expected to remain elevated in the coming months amid energy shortages caused by Russian attacks on energy infrastructure.
More rate cuts likely this year: The National Bank of Ukraine said it will continue its easing cycle if risks evolve in line with its baseline scenario. According to our panelists, the Bank should cut rates by at least a further 100 basis points by the end of 2026, with some panelists seeing rates ending this year as much as 400 basis points below current levels.The Bank is set to reconvene on 19 March.
Panelist insight: Commenting on the outlook, EIU analysts stated:
“We expect 250 basis points of further cuts to be distributed fairly evenly throughout the year. We expect the NBU to remain cautious around a resurgence of inflation, but the secured funding will give the bank additional latitude to focus on supporting the economy. The NBU’s next meeting is in March, where we expect a further 50 basis points of easing. As ever, however, the continuing war remains the greatest source of uncertainty in the outlook.”