As expected, inflation continued to grow at the start of the year, including due to the growing impact of underlying factors.
Governor of the National Bank of Ukraine Andriy Pyshnyy stated this at a briefing at the central bank, an Ukrinform correspondent reports.
Inflation accelerated to 12.9% yoy in January and, according to preliminary estimates, continued to rise in February.
“Temporary factors were the main drivers behind the increase in consumer inflation. Such trends had been expected and were generally in line with the NBU’s forecast. At the same time, the impact of underlying inflationary factors increased as businesses’ expenses on energy and wages continued to pass through to prices and as consumer demand remained rather strong. As a result, core inflation grew rapidly and outpaced forecast estimates, especially in terms of the services component,” Pyshnyy said.
He noted that inflation and exchange rate expectations of economic agents had mixed dynamics, but remained relatively stable overall due to the NBU’s measures to safeguard the sustainability of the FX market and protect hryvnia savings from inflation.
According to the National Bank, these measures resulted in lower volumes of net FX purchases by businesses and households in February, as well as in sustained demand for hryvnia savings instruments. Households’ inflation expectations improved at the start of the year.
At the same time, the statistics of search queries show that attention to inflation remains high. Given a potentially long-lasting period of high inflation readings, this could negatively affect inflation expectations and make price pressures more persistent.
“Inflation will rise in the coming months due to continued effects of last year’s lower harvests and increases in businesses’ production costs. At the same time, measures taken by the NBU to tighten its monetary policy will rein in underlying inflationary pressures, and the arrival of new harvests in the summer will restrain the growth in food prices,” Pyshnyy said.
As a result, the NBU expects inflation to return to a decelerating trajectory in the second half of the year and decline to single digits at the end of the year.
“The NBU’s measures will help bring inflation down to its 5% target over the policy horizon,” Pyshnyy said.
As reported, the National Bank raised the key policy rate to 15.5%. The new rate will be effective from March 7.
Governor of the National Bank of Ukraine Andriy Pyshnyy stated this at a briefing at the central bank, an Ukrinform correspondent reports.
Inflation accelerated to 12.9% yoy in January and, according to preliminary estimates, continued to rise in February.
“Temporary factors were the main drivers behind the increase in consumer inflation. Such trends had been expected and were generally in line with the NBU’s forecast. At the same time, the impact of underlying inflationary factors increased as businesses’ expenses on energy and wages continued to pass through to prices and as consumer demand remained rather strong. As a result, core inflation grew rapidly and outpaced forecast estimates, especially in terms of the services component,” Pyshnyy said.
He noted that inflation and exchange rate expectations of economic agents had mixed dynamics, but remained relatively stable overall due to the NBU’s measures to safeguard the sustainability of the FX market and protect hryvnia savings from inflation.
According to the National Bank, these measures resulted in lower volumes of net FX purchases by businesses and households in February, as well as in sustained demand for hryvnia savings instruments. Households’ inflation expectations improved at the start of the year.
At the same time, the statistics of search queries show that attention to inflation remains high. Given a potentially long-lasting period of high inflation readings, this could negatively affect inflation expectations and make price pressures more persistent.
“Inflation will rise in the coming months due to continued effects of last year’s lower harvests and increases in businesses’ production costs. At the same time, measures taken by the NBU to tighten its monetary policy will rein in underlying inflationary pressures, and the arrival of new harvests in the summer will restrain the growth in food prices,” Pyshnyy said.
As a result, the NBU expects inflation to return to a decelerating trajectory in the second half of the year and decline to single digits at the end of the year.
“The NBU’s measures will help bring inflation down to its 5% target over the policy horizon,” Pyshnyy said.
As reported, the National Bank raised the key policy rate to 15.5%. The new rate will be effective from March 7.
