The National Bank of Ukraine has decided to raise its discount rate from 16.0% to 16.5% per annum. This was announced by the Governor of the regulator, Andriy Pyshnyy, during a monetary briefing, according to RBC-Ukraine. According to him, this step is driven by "a significant increase in price pressure and the deterioration of inflation expectations." The NBU emphasizes that the increase should support the attractiveness of hryvnia assets and the stability of the foreign exchange market.

Decision and Its Rationale

"The National Bank has raised the discount rate to 16.5%... taking into account a substantial increase in price pressure and deteriorating inflation expectations," Pyshnyy stated. The regulator links the decision to the need to keep inflation expectations under control and return price dynamics to a trajectory of steady decline. As the NBU notes, a tighter monetary policy makes hryvnia deposits and domestic government bonds more attractive, which limits pressure on the currency market.

Inflation and the Military Component

The main reason for tightening policy was high inflation, which intensified against the backdrop of Russian attacks on business, logistics, and critical infrastructure. In September, annual inflation rose to 10% year-on-year, and according to NBU estimates, similar trends persisted in October. Pyshnyy specifically highlighted the military factor: "Shelling added 0.7% to inflation," he noted regarding the size of the military component in price pressure.

Forecasts for 2026–2027

The National Bank has revised its inflation forecast for the end of 2026 upward to 12.5% year-on-year. The regulator expects the indicator to decline only in 2027, down to 7.3%, when the impact of high global oil and fuel prices subsides. Thus, according to NBU calculations, the peak of inflationary pressure will occur at the end of the current year, while a gradual slowdown will begin next year.

Rate Hike Cycle

The current decision continues the tightening cycle that began in the summer. The National Bank kept the discount rate at 15% from the beginning of 2026 until July 31, after which it raised it to 15.5% in late July, and to 16% on September 18. Thus, within a few months, the regulator has raised the rate twice, and the current step to 16.5% is a continuation of this trajectory amid persisting price pressure.

Banking Sector Expectations

In the banking sector, the rate hike is considered necessary to curb inflation and maintain the attractiveness of hryvnia deposits. Serhiy Mamedov, Vice President of the Association of Ukrainian Banks and Chairman of the Management Board of Globus Bank, explained that the increase in the discount rate also performs the function of situational easing of demand for foreign currency. According to him, after August, when annual inflation was 8.1%, new factors accelerating it appeared by autumn, including attacks on energy, logistics, and corporate production chains.