Ukraine cuts interest rate to 15% as EU, IMF support steadies

Ukraine’s central bank lowered its interest rate to 15% on Thursday in Kyiv, the first reduction since June 2024, pointing to slower inflation and improved access to external funding.

The National Bank of Ukraine cited consumer price growth easing to 8% in December from 15.9% in May, helped by a better harvest and a stable currency. The European Union has pledged €90 billion in loans, improving Ukraine’s financing outlook even as Russian attacks have damaged energy infrastructure and forced blackouts during freezing temperatures.

“Lower price pressures, driven by NBU monetary policy measures, coupled with weaker risks of insufficient external financing, create room for a justified reduction in the key policy rate,” the bank stated.

According to the NBU, inflation is likely to keep slowing through the first half of the year before picking up later due to higher costs linked to power disruptions. The bank now projects inflation at 7.5% in 2026, compared with a prior forecast of 6.6%.

Beyond EU support, Kyiv reached a staff-level agreement with the International Monetary Fund for more than $8 billion under a four-year program. Board approval is expected early next month if the government completes required steps, including submitting to parliament a bill to raise taxes for self-employed entrepreneurs and expand duties on foreign parcels. The cabinet has not yet filed the draft.

With external support and domestic measures, the NBU estimates foreign reserves could reach a record $65 billion in 2026. The central bank trimmed its 2024 growth forecast to 1.8% from 2% due to the scale of damage to the power grid, which has constrained production and heating.

Officials indicated they will weigh the inflation path, the pace of external financing, and the impact of energy shortages when setting future policy.

As we reported earlier, the Federal Reserve left rates unchanged at 3.50%-3.75% after three cuts in late 2025. Chair Jerome Powell said tariff-driven price pressures are already appearing in inflation and warned that the U.S. deficit path is unsustainable. He emphasized decisions are taken meeting by meeting and leaned against near-term tightening, saying a rate hike is not the base case and recent data have not forced the Fed back into defensive mode.