, which has destroyed one - third of the economy. while responding to the war, the nbu had to deviate from its benchmark inflation targeting approach, but our fundamental principles remain unchanged. the nbu is committed to pursue its 2 / 3 bis - central bankers'speeches mandate, an effort that has made it possible to maintain macroeconomic stability and the sustainability of the financial system even as the perfect storm rages on. the nbu's first steps after february 24, 2022 were intended to prevent panic among the population and ensure the operation of the banking system and payments. the nbu imposed harsh restrictions on capital flows and fixed the exchange rate in order to anchor inflation expectations. to maintain financial stability, the nbu changed its operational design, supplied the financial system with the necessary liquidity, and took a number of steps to support the financial sector. in addition, to ensure the continuity of critical government expenditures, the nbu purchased domestic government debt securities. the central bank's rapid response enabled the banking system to survive the earliest, panic - vulnerable stage of the war. subsequently, to overcome economic imbalances that were accumulating fast amid an unprecedented shock, the nbu launched the stabilization of its monetary policy by raising its key policy rate to 25 % and weakening the official exchange rate by 25 %. coupled with revived support from international donors, this also preserved ukraine's international reserves at a relatively convenient level. these steps have enabled the regulator to maintain macroeconomic stability. inflation will be about 30 % at the end of 2022, the nbu projects. this, of course, is much higher than our inflation target, but the experience of other countries shows that in wartime it is a rather successful outcome. the nbu pursues forward looking approach and adjusts its policy to ensure a quick and sustainable recovery after the war ends. again, the world's post - war recovery experience shows that timely stabilization policies are what make economies thrive in peacetime. we therefore stay committed to our inflation - targeting regime and declare that we will resume it as soon as ukraine's business activity returns to normal. after all, a low, stable, and predictable rate of inflation guarantees macroeconomic stability and is a solid foundation for the productive development of the economy. although ukraine is facing additional challenges today, we as policymakers face common challenges of revitalizing the transmission channel and striking a balance between fiscal and monetary policies amid varying credibility. what unites us even more is

growth. 3 / 4 bis - central bankers'speeches last year, we had to pause inflation targeting, fix the exchange rate, and restrict capital movement. these measures allowed us to prevent panic in the early months of the invasion and maintain control over expectations, ensuring downward trend in inflation. as a result, we brought inflation close to the pre - war inflation target, the financial system remains stable, the economic downturn has stopped, and gradual recovery has begun. however, in the long term, the exchange rate peg deprives the central bank of the ability to effectively manage inflationary processes and leads to the accumulation of macrofinancial imbalances. ukraine knows this well from the experience of past currency crises. on the other hand, inflation targeting and a floating exchange rate policy from 2016 to 2021 allowed the national bank to ensure relative exchange rate stability, despite noticeable fluctuations in certain periods, reduce inflation and keep it close to the 5 % target. it also helped minimize cyclical economic fluctuations and contributed to economic growth, especially through a steady decrease in interest rates on hryvnia loans for businesses to historic lows. in july, the nbu clearly stated its intentions in the strategy for easing fx restrictions, transitioning to managed flexibility of the exchange rate, and returning to inflation targeting. according to the strategy, the transition to a more flexible exchange rate regime was to take place with the fulfillment of certain prerequisites, and the nbu's steps towards the strategic final goal - going back to inflation targeting - were to be gradual and well - balanced. remaining committed to this strategy, the nbu successfully transitioned to managed exchange rate flexibility in early october when the necessary prerequisites were met. in addition, step by step, we are easing restrictions on the foreign exchange market. we have also started a cycle of gradual reduction of the key policy rate to support economic recovery and see conditions for liberalizing the foreign exchange market and normalizing monetary policy in the future. while following global central banking best practices, we proceed cautiously, ensuring a gradual approach as macroeconomic prerequisites become clear to avoid compromising our achievements. maintaining trust in the national currency, the banking system, and the nbu's policy is paramount. today, our discussion will delve into the role of trust in shaping inflation expectations in ukraine, offering valuable insights for each participant. the war grinds on. we acknowledge the risks and the cost of error. our decisions and actions must be