Ukraine’s central bank raises key rate to 16.5% as inflation forecast worsens
The National Bank of Ukraine raised its key interest rate to 16.5% on October 29, citing stronger price pressure and worsening inflation expectations. It forecasts inflation will rise to 12.5% in 2026 while real GDP contracts by 0.4%, followed by gradual disinflation and economic recovery through 2028.
Key points
- The National Bank of Ukraine raised its key interest rate from 16% to 16.5% on October 29, 2026.
- The bank forecasts inflation will accelerate to 12.5% in 2026, decline to 7.3% by the end of 2027 and reach 5% in 2028.
- Real GDP is forecast to contract by 0.4% in 2026, grow by 0.4% in 2027 and expand by 2.2% in 2028.
- The rate was previously raised from 15% to 15.5% on July 30 and from 15.5% to 16% on September 17, 2026.
- Russian attacks and the blockade of ports are expected to reduce 2026 GDP by 1.9 percentage points and raise annual inflation by 0.7 percentage points.
- Ukraine’s business-activity expectations index fell to 45.8 in October 2026, its lowest level since summer 2024.
- International reserves stood at $49.0758 billion on November 1, 2026, after rising 4.2% in October.
Why it matters
The worsening inflation forecast and rate increase point to continued pressure on Ukrainian households, businesses and public finances. The simultaneous forecast of contracting real GDP in 2026 indicates that the economy is expected to remain weak even as monetary policy is tightened. The decline in business expectations to the lowest level since summer 2024 also points to subdued near-term activity.
What happened
The National Bank of Ukraine has raised its key interest rate three times since July, taking it from 15% to 16.5%. The October 29 decision followed stronger price pressure and worsening inflation expectations. In its October Inflation Report, the bank projected inflation of 12.5% in 2026, before it falls to 7.3% by the end of 2027 and returns to the 5% target in 2028. Real GDP is forecast to decline by 0.4% in 2026, then grow by 0.4% in 2027 and 2.2% in 2028.
Higher fuel prices, damage to production and logistics infrastructure and expanded fiscal stimulus are expected to increase business costs and sustain price pressure. The bank also estimates that intensified Russian attacks on businesses and infrastructure and the blockade of ports will leave 2026 GDP 1.9 percentage points below the level that would have prevailed without those events, while adding 0.7 percentage points to annual inflation. Ukraine’s international reserves reached $49.0758 billion on November 1, according to preliminary data.
How Ukrainian sources describe it
Ukrainian reporting focuses on the inflation forecast, real GDP trajectory and the central bank’s rate decisions. It links the increase in prices to fuel costs, infrastructure destruction, budget stimulus and Russian shelling, while highlighting weak business sentiment and the difficult combination of high inflation and economic contraction.
Background
Before the full-scale Russian invasion, the National Bank’s minimum key rate was 10%. The rate reached 25% in June 2022 and remained at that level until July 2023. The current tightening cycle began in July 2026, when the rate was raised from 15% to 15.5%, followed by increases to 16% in September and 16.5% in October.
The bank expects inflation pressure to ease gradually after 2026 as the effects of higher fuel prices fade, wage growth slows and monetary policy takes effect. It links the return to 5% inflation in 2028 to lower expected global oil prices, monetary policy, weaker domestic demand, easing pressure on the labor market, lower business production costs and increased domestic supply of goods and services.