Easing cycle ends: NBU raises prime rate by 0.5 ppt to 13.5%

UKRAINE - In Brief 13 Dec 2024 by Dmytro Boyarchuk
The NBU Board has raised the prime rate by 0.5 ppt to 13.5%, effective December 13, marking the end of the easing cycle that began in July 2023. The primary reason for this decision was the acceleration of consumer inflation, which exceeded the 10% threshold (+1.9% m/m and +11.2% y/y in November). Previously, NBU officials, in informal communications, noted that inflation exceeding 10% fosters elevated inflation expectations, necessitating a response from monetary authorities once that level is reached. The inflation surge has been driven by weak crop yields, rising labor costs, and increasing energy expenses caused by strikes on energy infrastructure. Additionally, higher taxes and substantial year-end budget outlays are expected to sustain strong CPI growth in the coming months. Given this context, it is unsurprising that the NBU has signaled the possibility of further rate hikes if elevated inflation persists. It is highly likely that the NBU will raise the prime rate by an additional 0.5 ppt—or even more—in January 2025.

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