The National Bank of Ukraine (NBU) kept its key policy interest rate at 17.0% last week, following four hikes by a cumulative 450bp between October 2017 and March 2018. Headline inflation eased to 13.2% y/y in March (from 14% in February) but remained well above the NBU’s end-2018 inflation target range of 6% ± 2pp. March inflation was mainly driven by surging prices for food, transport and some services. Core inflation remained also elevated at 9.4% y/y in March. Nonetheless, the NBU considered the current monetary conditions sufficiently tight to bring inflation back to its medium-term target (5% ± 1pp in 2019 and thereafter). In contrast, Euler Hermes expects headline inflation to remain above the targets in 2018-2019. Meanwhile, upwards revised data by the State Statistics Service show that real GDP grew by +2.2% y/y in Q4 2017 (gradually slowing down from +2.8% in Q1) and by +2.5% in full-year 2017. We expect higher interest rates to cause a growth deceleration to +2.2% in 2018.