National Bank Explains Rapid Price Growth in Ukraine: Causes and Economic Implications

Chas Pravdy - 07 August 2025 11:21

The head of Ukraine’s National Bank, Andriy Pishnyi, addressed the issue of the rapid rise in prices across the country and provided explanations for this phenomenon.

According to him, inflation growth has been driven by a series of negative factors that have intensified recently.

Specifically, poor harvests, labor market issues, and ongoing military conflicts in the east of the country have exerted additional pressure on price stability.

As a result, the National Bank had to revise its inflation forecasts for 2023 and the upcoming years.

Pishnyi emphasized that due to unfavorable harvest conditions, banking analysts halted the cycle of lowering the key interest rate, as increasing inflation requires further cautious measures.

“The war adds extra expenses to the economy, which directly impacts prices for consumers.

Moreover, a high level of employment and continuous migration due to shelling contribute to the inflationary dynamic,” he explained.

Meanwhile, by the end of 2024, considering rising inflation risks, the National Bank resumed a cycle of increasing the policy rate, which had been paused until March of this year.

In April, the operational design of monetary policy was also adjusted to improve control over economic fluctuations.

“The results are clear: interest rates on hryvnia-denominated instruments increased, demand for them grew, while demand for foreign currency decreased.

This indicates that inflation expectations are under control, and core inflation is on a stable declining trajectory,” he added.

According to the bank’s head, maintaining the existing interest rate level is an attempt to delicately balance ensuring a sustained slowdown in inflation to the 5% target while supporting economic recovery.

It’s a complex process requiring precise balancing between price containment and growth stimulation.

Currently, the situation allows for preserving financial sector stability and promoting long-term economic stabilization.

It is worth recalling that a few weeks ago, the Bank’s board decided to keep the key rate at 15.5%, considering the slowdown of inflation in June and the controlled inflation expectations.

This policy provides stability in currency markets and avoids excessive price hikes while supporting overall economic stability.

Source