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NBU Comments on Inflation in February 2018

12 March 2018

Press Release


In February 2018, headline inflation decelerated slightly to 14.0% yoy from 14.1% yoy in January. The Consumer Price Index (CPI) increased 0.9% mom. Those are the data published by the State Statistics Service of Ukraine.


Year-on-year, actual inflation has remained somewhat above the NBU’s forecast published in the January 2018 Inflation Report. This primarily reflected a higher-than-expected increase in prices for raw foods and fuels.


Overall, the current dynamics of headline inflation and its components signaled inflationary pressures remained significant. At the same time, the hryvnia appreciation, which has continued through early March, helped containing these pressures. Along with other factors, the NBU’s monetary policy tightening has contributed to these developments in the foreign exchange market.



·       In February, core inflation decelerated to 9.7% yoy. The annual core inflation rate slightly exceeded the NBU’s forecast, however, this was primarily due to higher January readings. Month-on-month, core inflation at 0.6% in February was in line with the forecast.


Benign foreign exchange market was a major factor behind core inflation deceleration in February. More specifically, the hryvnia strengthened against both the U.S. dollar and a trade weighted basket of currencies. This partially offset the impact of rising consumer demand and costs, including labor costs.


In particular, owing to the hryvnia appreciation the growth in prices for processed food products has slowed, as they also include imported goods, annual rates of growth for clothing and footwear prices remained flat, while prices for other non-food goods continued to grow at a moderate pace. In contrast, service prices continued to rise at a fast pace, despite a certain deceleration.


·       Growth in raw food prices decelerated to 22.9% yoy in February, albeit exceeded the forecast, same as in January. Raw food prices rose less rapidly compared with January with the deceleration mainly driven by slower growth in prices for meat and milk, which reflected the downward trend in global prices for these products.


However, meat and milk prices did not decelerate as much as forecasted.  Moreover, fruit prices grew faster than expected, including due to a rise in banana prices amid lower global production.


The growth in prices for borshch vegetables, especially cabbage, beet, and carrot picked up as well  due to lower supply of high-quality produce and large exports. In contrast, price growth for greenhouse vegetables, such as cucumbers, tomatoes, bell peppers, etc. slowed substantially (as a large share of greenhouse vegetables is imported). Their price developments were driven by both the significant hryvnia appreciation in February and larger imports.


·       Administered prices grew 16.1% yoy, which was generally in line with the forecast. Growth in prices for alcoholic drinks and tobacco products slowed as expected. Meanwhile, growth rates of prices for water supply and sewage collection, railway transportation, and preschool education picked up slightly.


·       Fuel prices grew 21.9% yoy, unchanged from the previous month, but exceeded the forecast as oil prices were higher than assumed in the forecast.



According to the NBU, the current monetary policy stance is sufficiently tight for headline inflation to decrease gradually and return to the target range in the middle of 2019.


Last modification   12.03.2018