The National Bank of Ukraine has significantly worsened its inflation forecast for 2026 due to rising fuel prices, Russian strikes on enterprises, and destruction of logistics infrastructure. According to the regulator's new estimates, consumer prices will rise by 12.5% by the end of the year instead of the 10% projected in the summer.
This is according to the updated macroeconomic forecast of the National Bank of Ukraine, published on October 29.
According to NBU estimates, the consequences of Russian shelling alone will add about 0.7 percentage points to annual inflation. This is one of the factors that forced the regulator to revise expectations for further consumer price growth.
The main negative impact is related to attacks on warehouse, production and logistics infrastructure. Destruction of enterprises and disruptions in the transportation of goods increase business costs, limit the supply of products and create additional pressure on final prices.
The second important factor was the rise in fuel prices due to the war in the Middle East. According to the National Bank, higher fuel prices affect inflation not only directly through prices at gas stations, but also indirectly through increased transport and production costs of enterprises.
An additional impact on price dynamics is the expansion of budget stimulus related to financing defense needs and reconstruction.
In September, annual inflation in Ukraine accelerated to 10%, and core inflation to 8.8%. According to NBU estimates, the trend of increasing price pressure continued in October. At the same time, inflation expectations of the population remain elevated, and forecasts of banks and financial analysts have noticeably deteriorated.
Compared to the July NBU forecast, the expected inflation rate at the end of 2026 is increased by 2.5 percentage points – from 10% to 12.5%. The forecast for 2027 is also worsened, but less significantly: from 6.9% to 7.3%.
The National Bank expects price growth to start slowing down in 2027. This should be facilitated by a possible decline in world oil prices, gradual exhaustion of the effects of previous fuel price increases, and monetary policy measures.
At the same time, the regulator forecasts a cooling of domestic demand and the labor market in the coming months due to the consequences of Russian attacks. Weaker demand may restrain price increases for goods and services, although it itself will indicate deteriorating conditions for economic activity.
Separately, the NBU draws attention to the possible ambiguous impact of the blockade of seaports. On the one hand, export restrictions harm Ukrainian producers. On the other hand, an increase in the supply of certain goods on the domestic market may temporarily lower purchase prices, in particular for some food products.
Despite the expected slowdown in inflation next year, the National Bank forecasts a return to the 5% target only in 2028. Important prerequisites remain the reduction of pressure on production costs of enterprises, restoration of logistics and an increase in the supply of Ukrainian goods and services.
At the same time, further price dynamics will largely depend on the security situation in Ukraine and the duration of the Middle East conflict. New large-scale destruction of production facilities or a further rise in world oil prices may lead to even stronger inflationary pressure.
Against the backdrop of a worsening inflation forecast, on October 29 the NBU decided to raise the key policy rate to 16.5% per annum effective from October 30. The regulator expects that the tightening of monetary policy will help contain inflation expectations and limit pressure on the foreign exchange market.
