NBU raises key policy rate to 15.5%: how it will affect businesses and citizens
7 March 2025 10:57
The National Bank of Ukraine (NBU) has raised its discount rate to 15.5% per annum effective March 7. This was reported by "Komersant Ukrainian" with reference to the NBU press service.
The increase in the discount rate of the National Bank of Ukraine is one of the main instruments of monetary policy that affects economic processes, inflation and household savings. In December 2023, the key policy rate was raised to 13.5%, and in January 2024 – to 14.5%.
The increase in the key policy rate to 15.5% is aimed at maintaining the attractiveness of hryvnia savings, the stability of the foreign exchange market, and controlling inflation expectations. However, it will also have a significant impact on the economy, businesses, and consumers.
Why the NBU raised the key policy rate
The main reason for raising the key policy rate was the rise in inflation, which in January 2025 amounted to 12.9% year-on-year. In February, this figure continued to rise. According to the NBU, the main factors behind this situation are higher energy and labor costs for businesses, as well as growing consumer demand.
NBU Governor Andriy Pyshnyi explained:
“Tightening monetary policy is a necessary step to maintain the stability of the economy. Raising the key policy rate will help reduce inflationary pressures and make hryvnia savings more attractive.”
Impact on citizens
More expensive loans. Bank loans to individuals, including mortgage and consumer loans, may become more expensive due to the rising cost of borrowing for banks.
More profitable deposits. At the same time, an increase in the key policy rate may encourage banks to offer higher interest rates on hryvnia deposits, making savings more attractive.
Inflation is under control. According to the NBU, the main goal of the rate hike is to return inflation to a steady decline, which is beneficial for citizens in the long run.
In addition, to increase the attractiveness of hryvnia savings, the NBU is amending the parameters of the operational design of its interest rate policy. Thus, starting April 4, 2025:
- the spread between the key policy rate and the rate on three-month certificates of deposit will increase by 1 pp;
- the spread between the key policy rate and refinancing loan rates will also increase by 1 pp;
- banks will be able to place funds in three-month certificates of deposit depending on the success of the last 12 months of increasing the portfolio of hryvnia deposits of households with a maturity of more than three months (the multiplier will increase from 3 to 3.5).
These changes will increase market incentives for banks to attract hryvnia term deposits from households. This will contribute to a further increase in interest rates on hryvnia time deposits, and thus to a stronger protection of hryvnia savings from inflationary depreciation. As a result, the risks to price dynamics, the foreign exchange market, and international reserves are expected to decrease.
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Impact on business
Increase in the cost of loans. Businesses that depend on bank loans will face higher financing costs.
Changes in the exchange rate. A more stable hryvnia may have a positive impact on importers, but exporters may experience a decrease in competitiveness.
Reduced investment. High interest rates make investments less profitable, which may slow down business development.
NBU forecast and further actions
Inflation is expected to continue to rise in the coming months, but the NBU’s measures should help bring it down to 5% in the long run. In addition, sufficient international support is expected to help avoid emission financing of the budget deficit.
NBU Deputy Governor Serhiy Nikolaychuk said:
“We are closely monitoring the economic situation and are ready to take additional measures if the risks to inflation increase.”
Experts expect that this measure will keep the economic situation under control and contribute to its recovery in the long run.
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