Ukraine keeps key interest rate unchanged, increases inflation forecast

Ukraine's central bank kept its main interest rate unchanged at a seven-year-high of 25% on Thursday and raised its 2022 inflation forecast to more than 30%. Devastated by the war with Russia, Ukraine's economy fell by around 40% year on year in the second quarter of this year, the central bank said, opening up the possibility it could keep the key rate at 25% until the second quarter of 2024.

Ukraine's central bank kept its main interest rate unchanged at a seven-year high of 25% on Thursday and raised its 2022 inflation forecast to more than 30%.

Devastated by the war with Russia, Ukraine's economy fell by around 40% year on year in the second quarter of this year, the central bank said, opening up the possibility it could keep the key rate at 25% until the second quarter of 2024. "The baseline scenario of the macroeconomic forecast envisages that the key policy rate will be maintained at 25% at least until Q2 2024," it said.

Ukraine's economy could shrink by a third in 2022 before recovering next year, the central bank said. It is expected to grow between 5% and 6% in 2023 and 2024, it said. It said that Ukraine's cooperation with international partners would be a key factor in supporting the economy and contributing to its recovery.

A long war with Russia, which invaded on Feb. 24, was the key risk to its forecast, the central bank said.