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NBU September 2018 Inflation Update

10 October 2018

Press Release


Consumer price inflation remained almost flat in September 2018, at 8.9% yoy (versus 9.0% yoy in August), exceeding the upper limit of the target range (6.5% +/- 2 pp as of the end of Q3 2018). In monthly terms, prices grew by 1.9%, largely driven by seasonal factors. This is according to the data published by the State Statistics Service of Ukraine.


In September, annual inflation came in above the forecast published in the July Inflation Report (8.3%) due to its core component and fuel prices.


·          Core inflation in September remained at the previous month’s level (8.7% yoy). The weakening in the hryvnia exchange rate over past few months prevented the expected slowdown in inflation. This boosted growth in prices for non-food products that are mostly imported (refrigerators, washing machines, cars, kitchenware, medicines, newspapers, books, etc.).


Growth rates of prices for processed foods remained unchanged. Thus, although growth in prices of goods with a sizeable share of imported inputs (chocolate, coffee, tea, pasta, etc.) accelerated, prices for meat and dairy products rose slower thanks to lower growth rates of raw material prices amid expansion of supply and lower global prices.


Services prices saw a slower growth in September. The persisting pressure from higher costs, in particular labor costs, and demand-side pressure caused prices for personal care, recreation, travel, medical, and other services to accelerate. At the same time, growth in prices charged by restaurants continued to decelerate, primarily on the slower growth in food prices.


·          Raw food prices rose at a slower pace in September (0.8% yoy), in line with the NBU’s projections. Fruit prices fell deeper, as expected, driven by the bountiful harvest of apples and some other fruit and berries. Vegetable prices continued to decrease: bell peppers and eggplants became cheaper; prices of cucumbers, beans, and garlic also declined further. Along with that, growth in prices for borshch vegetables accelerated due to the delayed harvest season for late vegetable crops, possibly reflecting heavy precipitations in September. In addition, flour prices grew faster, which passed through to prices of bakery products.


·          The growth in administered prices decelerated (to 13.5% yoy), coming in below the July NBU's forecast as the hike in gas prices for households was postponed. In September, growth in prices for alcoholic beverages and tobacco products decelerated. At the same time, faster growth in wages and fuel prices continued to push up administered prices. In particular, the rapid growth in fares of urban public transport was accompanied by a faster increase in minibus fares. Moreover, prices were raised for some postal services starting on 10 September 2018.


·          Fuel price growth accelerated (to 22.7% yoy) amid rapidly rising global oil prices and the weaker hryvnia.


Inflationary pressure remains high despite the lower food price inflation. Sustained domestic demand, fast growth in wages, and a sharp increase in global oil prices support the rapid price growth. A new inflation forecast that incorporates all of the said factors will be announced after the Board’s monetary policy meeting, which is to take place on 25 October 2018, and published in the Inflation Report on 1 November 2018.



Last modification   10.10.2018