Abstract
<jats:p>The study examines the role of the policy rate as a key instrument of monetary policy in ensuring price stability in Ukraine. The relevance of the topic is driven by the high sensitivity of the national economy to inflationary processes, which is intensified by the impact of financial crises, devaluation shocks, the pandemic, and the full-scale invasion. The paper outlines the theoretical foundations of the policy rate and the mechanism of its influence on the economy through the monetary transmission mechanism. It is substantiated that the key interest rate affects inflation by changing the cost of credit resources, the behavior of economic agents, and aggregate demand. Particular attention is paid to the role of trust in the central bank and effective communication policy as important factors enhancing monetary transmission. The dynamics of the policy rate and inflation in Ukraine across different economic periods are analyzed. The study examines changes in the policy rate of the National Bank of Ukraine during 2013–2026 and evaluates its impact on inflationary processes. It is established that monetary transmission in Ukraine involves a time lag and has the most noticeable effect on inflation after 9–18 months, necessitating a proactive monetary policy. Based on the analysis, forecast estimates are developed, indicating a gradual recovery of macroeconomic stability, a reduction in inflationary pressure, and improved effectiveness of monetary policy under conditions of relative economic and political stability. Particular attention is devoted to forecasting the policy rate and its role as a tool for managing expectations. It is determined that the projected trajectory of the rate reflects a balance between the need to curb inflation and support economic growth. A comprehensive approach to enhancing the effectiveness of monetary policy is proposed, including strengthening trust in the regulator, flexible rate management, maintaining banking system liquidity, transparent communication, and policy coordination. The study concludes that the policy rate in Ukraine has evolved from a secondary indicator into a key instrument of macro-financial stabilization. Its effectiveness is greatest in the medium term and under conditions of a predictable economic environment. The future effectiveness of this instrument will depend on the sustainability of public finances, the scale of international support, and the economy’s ability to adapt to internal and external challenges.</jats:p>