NBU raises prime eate to 15.5% amid high inflation, depreciation pressures, and growing tensions with U.S.

UKRAINE - In Brief 06 Mar 2025 by Dmytro Boyarchuk
The NBU Board has predictably raised the prime rate for the third time, increasing it by 1.0 ppt to 15.5%, effective March 7. Additionally, the NBU adjusted the 'working' rates for the banking system by 1 ppt. On top of that, it widened the spread by 1.0 ppt between the prime rate and the three-month deposit certificate rate, as well as overnight loans. Furthermore, the NBU expanded the banks' ability to allocate excess liquidity into deposit certificates. Persistently high inflation (+1.2% m/m and +12.9% y/y in February) and elevated depreciation concerns are driving the NBU to tighten its monetary policy further. The March inflation data will be released next Monday, but the NBU likely already has provisional estimates. The hawkish tone of its press release suggests that inflationary pressures have yet to ease. FX interventions decreased slightly in February, falling to $3.1 billion from $3.7 billion in January and $5.3 billion in December, but they remain substantial. Given the ongoing inflation trends and rising tensions with the new U.S. administration, further prime rate hikes appear inevitable in the coming months. The next NBU Board meeting on the matter is scheduled for April 17.

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