The National Bank has stopped the process of lowering the key policy rate, which had been underway since the summer of 2023. During this time, it fell from 25% to 15%. At its first monetary policy meeting in 2024, the regulator decided not to revise it.

"This decision is consistent with the need to further maintain exchange rate stability, maintain moderate inflation in 2024, and bring it to the target range of 5% ± 1 pp over the monetary policy horizon," the NBU said in a commentary.

The regulator explained that the key policy rate was decided to remain at 15%, taking into account the balance of risks. The main one is still the situation at the frontline.

The NBU retains the assumption in its forecasts that high security risks will decrease significantly from 2025. However, the NBU believes that the risk of longer-lasting large-scale hostilities has increased compared to the previous forecast.

This will have a negative impact on business and consumer sentiment, exchange rate and inflation expectations, increase pressure on public finances, and exacerbate problems in the labor market.Under this scenario, economic growth potential will be lower and inflationary pressures will be higher than currently expected.

In addition, there are significant risks of systematic disruptions in the rhythm of international aid flows and a more significant decline in its volume compared to the base scenario.