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NBU October 2018 Inflation Update

12 November 2018

Press Release


In October 2018 consumer price inflation accelerated to 9.5% yoy, up from 8.9% yoy in September. In monthly terms, prices grew by 1.7%. This is shown by the data published by the State Statistics Service of Ukraine.


In October, the Consumer Price Index (CPI) was in line with the NBU’s forecast published in its October 2018 Inflation Report. As expected, the underlying inflationary pressure remained high due to increased costs, including labor costs, and the sustained domestic demand. In addition, the higher global fuel and grain prices expectedly exerted the upward pressure on domestic prices.


      Core inflation accelerated slightly in October, to 8.8% yoy, which also matched the NBU’s projections. The underlying price dynamics primarily reflected the rise in services prices driven by the further growth in production costs, wages in particular, and the pressure from consumer demand. Specifically, growth accelerated in the services prices of hair salons, cable TV, some types of home repairs and maintenance, mobile communication, etc.


Prices for non-food goods rose at a steady pace in October. Prices for some durable goods (in particular, TV sets and mobile phones) dropped, offsetting the increase in prices of other durables (materials for the maintenance and repair of the dwelling, goods for routine household maintenance, jewelry, etc.).


The paces of growth for processed food prices barely changed in October. On one hand, higher flour prices boosted growth in prices of pasta, confectionery, and sweet baked goods. On the other hand, prices for meat and dairy products grew at a slower pace.


      Raw food prices rose faster in October (1.6% yoy), albeit not as fast as the NBU had projected. Fruit prices continued lower owing to the bountiful harvest of these crops, primarily apples. Moreover, prices of vegetables increased less than expected, among other, due to the larger supply of greenhouse vegetables. However, in October, prices of borshch vegetables accelerated, as there still was a shortage of these vegetables in the first half of the month due to a later harvest season.


      Administered prices grew at a faster pace (14.6% yoy) that exceeded the October forecast. The increase in minimum prices spurred prices of alcoholic drinks. The rise in global fuel prices and the persisting pressure from labor costs resulted in higher fares for road passenger transport. Besides, prices for railway passenger transport were hiked effective 1 October.


      Fuel prices grew faster expectedly (24.5% yoy) owing to a sharp increase in global oil prices and the hryvnia weakening seen in the previous periods.


Taking into account the published data, the NBU views the risks to the inflation forecast highlighted in the October 2018 Inflation Report as balanced. The central bank therefore expects inflation to reach 10.1% yoy at year-end 2018 on the back of administered price increases. Over the medium term, inflation is expected to gradually decline to the target level of 5.0% yoy ± 1 pp.

Last modification   12.11.2018