The National Bank of Ukraine's board has raised its key discount rate from 15% to 15.5%. The central bank said the move responds to stronger underlying inflation pressure and is meant to keep hryvnia assets attractive while curbing inflation expectations.
A column published by LIGA.net questioned whether the increase can meaningfully change the situation. The author said Ukraine's economy is not going through a classic demand-driven overheating cycle but a war economy, where inflation is driven mainly by a shortage of workers, rising production costs, damaged logistics, higher energy costs, high transport costs, dependence on imports and large defense spending, factors the discount rate barely touches except through the cost of borrowing.
Delayed effect and inflation forecast
The central bank itself acknowledges that monetary policy takes nine to eighteen months to take effect, meaning the increase is unlikely to significantly change inflation this year. The NBU forecasts inflation will accelerate to about 10% by the end of 2026 regardless, according to the column, so the rate rise would only aim to prevent faster acceleration rather than bring a quick slowdown.
The NBU has said the effect of port blockades on inflation would be favorable for end consumers, because domestic supply of agricultural raw materials would increase, keeping food prices from rising quickly or pushing them down, though this would come at the expense of farmers' financial position, the bank said.
Banking system liquidity
Hundreds of billions of hryvnias are held in NBU deposit certificates, with hundreds of billions more sitting in banks' correspondent accounts, the column said, meaning most large banks are not short of resources. Corporate lending keeps growing at a high pace, officials say, though much of that financing runs through state support programs, so the additional 0.5 percentage point is unlikely to significantly change bank behavior.
The rate rise does raise the yield on NBU deposit certificates, increasing bank income from operations with the central bank, while also raising borrowing costs for part of the small and medium business sector, according to the column.
New certificate mechanism
The NBU also modernized the operational design of its interest rate policy, introducing a new mechanism for placing three-month deposit certificates, which the bank believes could make the policy more effective. The column argued this is an implicit admission that the rate level alone is not the problem, but noted banks are likely to hit limits on three-month certificates and switch to overnight certificates, which now yield 15.5% compared with current average government bond and loan rates of 15.3%, which the author called a complete absurdity of monetary design.
Criticism of NBU leadership
The column said the decision mainly serves a psychological and communication function, showing the NBU's readiness to react to risks and support confidence in the hryvnia, while describing recent NBU leadership actions as public relations for one figure rather than systemic policy. The author called the real positive yield the NBU has kept on hryvnia assets since the war began the biggest mistake of its monetary policy, saying it hampers the economy's adaptation to wartime conditions and mainly serves bank profits, calling it four years of monetary terror. The column warned that Ukraine is losing time for the economy to self-adapt and predicted a surge in delayed demand once the war ends will fuel inflation alongside recovery, adding that the country currently has inflation without GDP growth, which it said makes the decision absurd and harmful.
The column also said raising the rate will increase the cost of government borrowing, but argued NBU officials are more interested in the rising value of government bonds, since many NBU leaders and managers hold them.
