NBU raised the discount rate due to inflation: how the forecasts for 2026 have changed
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The National Bank of Ukraine has raised the discount rate from 16% to 16.5% per annum due to increasing inflationary pressure and worsening expectations for price growth. At the same time, the regulator has worsened the forecast for the economy: it now expects it to shrink by 0.4% in 2026 and inflation at 12.5%.
This was announced by the NBU during a briefing on monetary policy on October 29.
The National Bank explained that the increase in the discount rate should support the attractiveness of hryvnia assets, the stability of the foreign exchange market, and help contain inflation.
“The Board of the National Bank of Ukraine has decided to increase the discount rate to 16.5% in view of the significant increase in price pressure and worsening inflation expectations. This decision will support the attractiveness of hryvnia assets and the stability of the foreign exchange market, which will allow maintaining control over inflation expectations and price dynamics,” the regulator said.
How the NBU’s economic forecasts have changed
The National Bank also revised its macroeconomic forecast for 2026. Previously, the regulator expected the Ukrainian economy to grow by 1.8%, but now it predicts a 0.4% contraction.
The inflation forecast has also worsened: instead of the previously expected 10%, the NBU now predicts it will increase to 12.5%.
The regulator links the worsening economic prospects to increased Russian attacks on Ukrainian business and the blocking of maritime logistics, which led to a significant reduction in exports.
An additional factor was the delay in international financial assistance due to Ukraine’s failure to fulfill some of its reform commitments. This creates additional risks for the stability of the hryvnia.
How will a rate hike affect the economy?
The NBU believes that a moderate rate increase should not lead to a further slowdown in the economy. On the contrary, price stability is an important prerequisite for the restoration of sustainable growth and the development of lending.
“Price stability is a necessary prerequisite for the restoration of sustainable economic growth and sustainable development of lending. A moderate increase in the discount rate is a balanced decision that allows maintaining a balance between controlling inflation and supporting the economy,” the National Bank noted.
The regulator also emphasized that it continues to support lending in Ukraine. To this end, regulatory changes are being developed aimed at supporting enterprises in the defense industry, energy, agriculture, and trade.
The NBU discount rate affects the value of money in the economy, including interest rates on loans and deposits. When the rate increases, it becomes more profitable for banks to place funds in National Bank certificates of deposit, and loans to businesses and individuals may become more expensive.
Raising the rate also encourages people and businesses to save more and hold back spending. This helps reduce demand for goods and services and slow down price increases.
It was previously reported thatthe World Bank significantly worsened the forecast for Ukraine’s economic growth in 2027. One of the reasons was the new assumption that active hostilities will continue throughout next year.
In addition, inflation in Ukraine accelerated to 10% year-on-year in September. The prices of eggs, clothing and footwear, and educational services rose the most during the month.