Ukraine’s central bank, the National Bank of Ukraine (NBU) has cut the country’s key rate from 15.5% to 15% and announced the start of a cycle of interest rate policy easing as inflation slows down and approaches the NBU’s target.
However, Russia’s attacks on the energy grid so far in 2026 have further dented Ukraine’s economic growth prospects and meant a slower forecast decrease in the key rate despite decelerating inflation.
The Board of the NBU announced the decision during its briefing with reporters on Jan. 29.
The annual inflation rate in December fell to 8% compared with the same point last year, with core inflation (which excludes volatile prices) also decreasing to 8%. The NBU’s target is 5%.
Annual growth rates of consumer prices also decreased in January, the NBU wrote. But it still notes uneven inflation expectations.
Harvests – which form the majority of Ukraine’s consumer basket – became more plentiful in 2025 than in 2024, driving down prices. A year ago, Kyiv Post wrote how the higher prices for harvests, coupled with a spike in electricity prices, had been pushing inflation upward, which preceded a year of slow descent.
However, Russia’s attacks in 2026 have massively damaged the energy grid, putting additional pressure on prices.
“Coupled with low base effects, this will drive a moderate acceleration of inflation in the second half of 2026. Therefore by the end of 2026, inflation will decline moderately, to 7.5%”, NBU governor Andriy Pyshny said during the briefing.
On top of that, Russia’s strikes have again dented Ukraine’s real GDP growth estimates, as calculated by the NBU, from 1.9% to 1.8% for 2025. This also led to the NBU decreasing the key rate slower than previously forecast.
War puts pressure on growth
The deferred effects of damage to the energy sector will put the brakes on disinflation in the coming years, the NBU reported in its press release. It forecasts inflation to decline to 6% at the end of 2027 and reach the target of 5% in 2028.
The economy revived in late 2025 thanks to late harvesting and later budget spending, but Russia’s attacks disrupted logistics and enlarged the electricity deficit to approximately 7% in the fourth quarter of 2025, according to NBU Governor Andriy Pyshny
“In the baseline scenario (probability of implementation over 50%), the electricity deficit has been increased from 3% to 6% for 2026. This will have a direct downward effect on economic growth, estimated at 0.4 percentage points. Without energy shortages, the GDP forecast would be 2.2% rather than 1.8%. Residual effects are also expected in 2027 (minus 0.1 percentage points),” Deputy Governor Volodymyr Lepushynskyi said during the briefing, in response to questions by reporters.
Lepushynskyi also added that Russia’s strikes on ports and factories caused a decline in Ukraine’s exports by $150 million in the fourth quarter of 2025. Thee NBU forecasts that they will cause another decline by $1 billion in the first quarter of 2025. Ukraine’s businesses had to reorient parts of exports by rail through Europe, he said.
Ukraine looks forward to financing from the IMF and EU
In November last year, the International Monetary Fund (IMF) and Ukraine reached staff-level agreement on a new four-year $8.1 billion Extended Fund Facility (EFF). Ukraine now needs to vote on tax laws, then the final step will be a vote by the IMF’s board of directors to greenlight the new program – expected to take place in February.
Ukraine’s Ministry of Finance is currently involved in talks taking place between business representatives and the IMF on the design of tax laws, but the NBU is sure they will lead to a successful result, according to the NBU governor.
“We expect February to bring us good news and a meeting of the International Monetary Fund’s Board of Directors, where the $8.1 billion programme will be approved. For this to happen, we have to do some homework… The baseline scenario… is probably the third week of February in terms of the adoption of the relevant decision and news from Washington regarding the programme,” he said.
At the end of 2025, the EU Council decided to provide Ukraine with €90 billion ($106 billion) in financial assistance over 2026-2027 via the Ukraine Support Loan (USL), decreasing levels of uncertainty about financing Ukraine as the war drags on. The EU Commission aims to allocate about €60 billion ($70 billion) toward military assistance, with the remaining €30 billion ($35 billion) allocated to general budget support.
Based on these developments, the NBU’s forecast for its international reserves look to set new records – reaching $65 billion as of year-end 2026, and $71 billion as of year-end 2028.