Financial sector news

In November, both consumer and core inflation slowed to 9.3% y/y, while inflation expectations remain elevated. In the coming months, inflation is expected to continue to decline gradually, thanks in particular to the effects of new harvests, which will contribute to a further slowdown in food price growth. The NBU's measures to maintain interest in hryvnia assets and currency market stability will also curb fundamental price pressures.

Full-scale war remains the main risk to inflation dynamics and the country's economic development. Russian aggression continues to pose threats to price stability and economic activity. In addition, risks related to the irregularity and/or insufficiency of external financing remain.

The following risks are also relevant:

• additional budget expenditures to maintain defense capabilities and reconstruction;
  
  
• further destruction of energy infrastructure, which may put pressure on enterprises' costs and limit their production potential;
  
  
• deepening negative migration trends and widening labor shortages in the domestic labor market.
  
  

That is why the Board of the National Bank of Ukraine (NBU) decided to keep the discount rate at 15.5%.
At the same time, there is still a possibility of positive scenarios. They are primarily related to the possible strengthening of military and financial support from partners and the efforts of the international community to ensure a just and lasting peace for Ukraine.
The NBU notes that international financing continues to be an important source of support for the economy. Since the beginning of the year, Ukraine has received $45.8 billion in official financing. By the end of the year, it is expected to receive more than $5 billion. External financing makes it possible to maintain an adequate level of international reserves, which strengthens the NBU's ability to ensure the stability of the currency market. Thanks to international support and domestic borrowing, the government retains the ability to fully finance all critical budget expenditures. At the same time, uncertainty surrounding the parameters of external financing for 2026–2027 remains.

As part of its macro forecast, the NBU anticipates a reduction in the discount rate starting in the first quarter of 2026. However, if inflationary pressures increase or new inflationary risks become more significant, the NBU is prepared to postpone this reduction. On the other hand, a reduction in inflationary risks will allow the NBU to move to a cycle of easing interest rate policy.