The National Bank of Ukraine has kept its base rate at 15 per cent

In May, consumer inflation slowed to 8.2% y/y

The National Bank of Ukraine (NBU) has kept its policy rate at 15 per cent. This is stated in a press release from the regulator.

As noted, this decision ensures that current monetary conditions remain sufficiently tight, whilst also taking into account the strong demand for hryvnia-denominated savings instruments and the easing of risks associated with the war in the Middle East and a shortage of external financing.

“At the same time, given signs of mounting fundamental price pressures, the NBU stands ready to raise the policy rate if necessary to maintain control over inflation expectations and return inflation to a sustained downward trajectory towards the 5% target,” the regulator notes.

In May, consumer inflation slowed as expected to 8.2% year-on-year, influenced by seasonal factors, whilst core inflation accelerated slightly (to 7.9% year-on-year). Both figures were higher than the trajectory set out in the National Bank’s April forecast, primarily due to stronger second-round effects from the sharp rise in energy prices in previous months.

The regulator forecasts that inflation will remain close to current levels over the coming months, accelerate towards the end of the year, but return to a slower pace in 2027.

The NBU continues to expect sufficient inflows of external financing, which will be enough both to finance the budget deficit and to increase international reserves, which is important for ensuring the continued stability of the foreign exchange market.

The main risk to inflationary trends and economic development remains the consequences of Russian aggression; however, developments in the Middle East could also have a significant impact.

It should be noted that the State Statistics Service revised its estimate of the fall in Ukraine’s real GDP in the first quarter compared with the same period last year from 0.5% to 0.6%.