By Olena Harmash
KYIV (Reuters) -Ukraine’s central bank kept its key policy rate unchanged at 15.5% on Thursday and cut its growth forecast for this year, with Russian strikes on energy infrastructure and wartime staff shortages set to significantly constrain business activity.
The central bank cut its forecast for gross domestic product growth to 1.9% in 2025 from the 2.1% expected previously. The growth forecast for 2026 was revised to 2% from 2.3% earlier.
“The economy continues to grow, but the growth pace will remain moderate due to the effects of the war,” Governor Andriy Pyshnyi told an online media briefing.
“The energy deficit caused by the recent destruction of infrastructure and gas production facilities, combined with labour shortages, will significantly limit business activity.”
RUSSIA ATTACKS POWER SECTOR BEFORE WINTER
Russia has attacked the Ukrainian power sector and energy facilities in consecutive winters since its full-scale invasion of Ukraine in February 2022.
Moscow has again stepped up its missile and drone attacks on energy facilities across Ukraine as winter looms, and hundreds of thousands of people were left without electricity this week following Russian strikes on Kyiv.
Pyshnyi said a central bank initiative called “Power banking” would ensure uninterrupted banking services to the population even in the case of long blackouts.
Earlier in the war, the central bank and commercial banks set up a network of banking branches across the country, which are equipped with back-up generators and internet access.
“The central bank has focused on the issue, realising that the autumn will be difficult,” Pyshnyi said. “The attacks, their intensity and the depth of the energy system damage have increased. This is the challenge we have prepared for.”
Pyshnyi said the central bank would stick to relatively tight monetary conditions. He expected that the central bank might start easing its monetary policy in the first quarter of 2026.
He said that, despite consumer price inflation slowing in recent months, inflation expectations remained high and inflation risks had grown, particularly those related to energy shortages and higher budgetary needs.
Consumer price inflation slowed to 11.9% year-on-year in September, from 13.2% in August, official data showed.
The central bank expects inflation to reach 9.2% at the end of 2025 and slow further to 6.6% in 2026 and to a target of 5% in 2027.
The central bank has kept its key rate unchanged since March 2025.
(Reporting by Olena Harmash, Editing by Timothy Heritage and Alex Richardson)
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