Ukraine’s central bank raised its main interest rate to 9% from 8.5% last week and stood ready to tighten monetary policy again as it warned about the risk of a military conflict with Russia and higher global food and gas prices.

The National Bank of Ukraine (NBU) began tightening monetary policy in March this year after cutting rates to an historic low last year to support an economy reeling from the pandemic.

It has now raised rates five times this year as inflation spiked to 11%, the highest level since 2018 and more than double the central bank’s target range of about 5%. The NBU is now weighing the risks of a sharp military escalation between Ukraine and Russia.

Kyiv and its NATO allies say Russia has moved tens of thousands of troops near Ukraine’s borders, heightening fears that a simmering conflict in eastern Ukraine could erupt into open war between the two neighbours.