The National Bank has kept the discount rate at 15%: an explanation of the decision
30 April 15:08
The National Bank of Ukraine has decided to keep the discount rate at 15%. The NBU Board adopted this decision at its meeting on April 30. This is stated on the institution’s official website, according to "Komersant Ukrainian".
“The Board of the National Bank of Ukraine has decided to maintain the discount rate at 15% to support the attractiveness of hryvnia-denominated instruments, the stability of the foreign exchange market, and the manageability of inflation expectations amid intensifying price pressures. Appropriate monetary conditions will help bring inflation back onto a path of steady deceleration toward the 5% target over the policy horizon,” the statement reads.
It is noted that should risks to price dynamics intensify, the NBU will be ready to implement additional measures to curb inflationary pressures.
Why is inflation rising?
As explained by the National Bank, after a prolonged period of decline, inflation began to rise, primarily due to higher energy prices.
Inflation slowed steadily from June 2025 to January 2026, but subsequently began to rise.
“Price pressures intensified due to the difficult situation in the energy sector following Russian shelling, a sharp rise in fuel prices amid the war in the Middle East, the effects of the hryvnia’s depreciation in previous periods, as well as faster-than-expected wage growth,” the statement reads.
In March, inflation accelerated to 7.9% year-on-year, and core inflation to 7.1%. Both figures exceeded the NBU’s previous forecast. According to the NBU’s estimates, inflation continued to rise in April. At the same time, inflation expectations among most respondent groups remained stable, and public expectations improved in April after deteriorating in the first quarter, returning to the level seen at the end of last year.
As the agency explains, inflation will remain near current levels in the coming months but will accelerate in the second half of the year (to 9.4% by year-end) due to increased pressure on enterprises’ production costs, primarily as a result of the rise in energy prices that has already occurred. The rise in fuel prices will be reflected in inflation both directly and through secondary effects, which will impact the price dynamics of various goods and services with a certain time lag.
“Inflation will return to a steady downward trajectory in 2027. This will be facilitated by the waning effects of high fuel prices, a reduction in external price pressures, a gradual increase in crop yields, and an improvement in the energy sector. The NBU’s monetary policy measures will also have a significant impact. As a result, inflation will slow to 6.5% by the end of 2027 and to the target of 5% in 2028,” the National Bank forecasts.
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Expectations of Moderate Economic Growth
At the beginning of 2026, economic activity slowed, primarily due to the consequences of Russia’s attacks on energy infrastructure and logistics facilities amid a very cold winter. Restrained fiscal policy also had an additional impact, given delays in foreign aid disbursements. Economic activity picked up somewhat as energy shortages eased in the spring, but overall, real GDP growth in the first quarter slowed to 0.2% year-on-year, according to NBU estimates, the agency explains.
“Increased budget spending as international aid flows in will help revive the economy over the coming months. At the same time, given the weaker first-quarter results, the still-precarious state of the power grid, and the accumulation of negative economic effects from the war in the Middle East, the NBU has lowered its GDP growth forecast for 2026 to 1.3%,” the statement reads.
The National Bank notes that as conditions for Ukraine’s economic functioning gradually normalize and geopolitical tensions ease, real GDP growth is expected to accelerate to 2.8–3.7% in 2027–2028. This will be driven primarily by robust consumer demand, a revival of investment activity, the restoration of the power grid, and increased crop yields.
Foreign aid will help finance the deficit
As explained by the National Bank, uncertainty regarding external support has significantly decreased. In April, the EU unlocked €90 billion in funding for Ukraine under the Ukraine Support Loan (USL) program. The first tranche is scheduled to arrive in June. Further funding is also expected under the EU’s Ukraine Facility and the G7’s Extraordinary Revenue Acceleration (ERA) programs in 2026–2027, as well as under the IMF’s Extended Fund Facility (EFF) in 2026–2029.
“In total, international aid inflows are projected to exceed $53 billion in 2026, with approximately $42 billion in 2027 and $22 billion in 2028. This level of external support will make it possible to finance all critical budget expenditures and maintain a high level of international reserves (US$60–67 billion in 2026–2028), which will ensure the NBU’s ability to maintain the stability of the foreign exchange market,” the NBU reported.
What is the main risk to inflation dynamics
The consequences of Russian aggression remain the main risk to inflation dynamics and economic development, but the course of other geopolitical events, particularly in the Middle East, will also have a significant impact
“The war continues. Its consequences pose the greatest threat to price dynamics and economic activity. Russia’s attacks on critical infrastructure over the past few months have already led to significant disruptions in energy supply, rising business costs, and increased inflationary pressure. At the same time, the risks of further destruction of key energy and logistics facilities remain,” the statement reads.
According to the NBU, other risks directly or indirectly related to the war remain relevant:
- the emergence of additional budgetary needs to maintain defense capabilities and support reconstruction;
- disruptions in the regularity and/or changes in the volume of international financing;
- the deepening of negative migration trends and the widening of the labor shortage in the domestic labor market.
Developments in the Middle East will also have a significant impact. The actual consequences and potential effects of a short-term conflict are factored into the forecast. However, if this war is protracted, global energy prices will be higher than currently expected, and external demand for Ukrainian products will be lower.
“This will cause more significant inflationary pressure in Ukraine and negatively affect economic activity. Furthermore, it will increase Russia’s ability to continue a full-scale war. A further escalation of geopolitical conflicts could also negatively impact international support for Ukraine,” the NBU explains.
At the same time, given the European community’s growing involvement in Ukrainian issues, the possibility of positive scenarios remains. These are linked, in particular, to increased military and financial support from partners and the achievement of significant progress in securing a just and lasting peace for Ukraine. The National Bank also hopes that among the positive scenarios is the implementation of large-scale investment projects as security risks decrease, reforms accelerate, and European integration progresses. If risks to price dynamics intensify, the NBU will be ready to implement additional measures to curb inflationary pressure
As a reminder, the NBU’s discount rate influences interest rates in the economy: the higher it is, the higher interest rates on loans and deposits become. In particular, the discount rate determines the interest rates on certificates of deposit (in which banks can invest) and refinancing loans.
By raising the discount rate, the NBU encourages economic agents to save more and spend less, particularly by taking out fewer loans. This slows the velocity of money and leads to lower prices.
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