Ukraine's Central Bank Maintains 13% Key Rate Amid Rising Inflation Pressures

Ukraine's central bank has held its key rate at 13% amid ongoing inflationary pressures influenced by high energy costs and rising excise duties. Inflation is expected to reach 8.5% by year-end due to increasing electricity and staff costs. The conflict with Russia remains a significant economic risk.

Ukraine's central bank has decided to maintain its key interest rate at 13% for the second consecutive time, as revealed on Thursday. The decision comes amid projections that inflation will continue to rise in the forthcoming months, driven by escalating energy costs and higher excise duties.

According to Governor Andriy Pyshnyi, the central bank aims to bring inflation back to its 5% target while stabilizing the foreign exchange market. He noted that consumer prices increased by 7.5% in August compared to the same month last year, with inflationary pressures accelerating in recent weeks.

The persistent armed conflict with Russia remains the primary risk to Ukraine's economic stability, exacerbating public finances and energy shortages. In response, the government has amended its 2024 budget to raise defence spending by approximately $12 billion, with plans to finance this through increased domestic borrowing and higher reserve requirements for banks.

(With inputs from agencies.)