The consumer price index is declining further. Mr. Oleksandr Petryk, Deputy Director of the NBU General Economic Department, has communicated that in July CPI inflation stood at “minus” 0.2%. However, the downward trend in annual CPI inflation has come to a halt, with CPI inflation standing at an annual rate of 0%.

The halt in the downward trend in annual CPI can be attributed primarily to a low comparison basis of the previous year. Looking back, the prices for agricultural products fell sharply owing to the last year’s good harvest. As a result, CPI inflation stood at “minus” 1.3% in July 2011.

Annual core CPI inflation has been on a downward trend for the eleventh month in a row, standing at 3.1% in July. A decline in annual core CPI was primarily driven by two factors: 1) the balance monetary policy pursued by the National Bank of Ukraine focused on reducing inflation in the long run; 2) the secondary effects arising from a drop in prices for raw foods in 2011 and the first half of 2012.

The administratively-regulated prices demonstrated moderate growth, having risen by 0.4% in July, thus having very little impact on the overall change in the CPI. A 1.4% drop in fuel prices was driven by a fall in oil prices in the global commodity markets.

The inflationary expectations continue to slacken, having hit a record low in July.

The relatively stable exchange rate of hryvnia and low inflation rates in the countries, being Ukraine's main trading partners, triggered a slight rise (0.4% yoy) in prices for imported goods in the consumer basket in Ukraine.

In July, industrial producer prices fell sharply by 2.9%. As a result, annual PPI inflation slowed down to 1.4% in July, down from 4.5% in June, which was driven by a drop in prices for key commodities in the global commodity markets.

“To sum up, the current low-inflation environment is deemed close to optimal. On the one hand, it means that inflation does not impede economic growth. On the other hand, it does not generate heightened inflationary expectations. This inflation situation gives policymakers a bigger cushion to push through structural reforms and take measures to ensure sustainable economic growth in the coming years,” concluded Mr. Oleksandr Petryk.