Ms Olena Kovalenko, Director of General Economic Department of the National Bank of Ukraine, has said that CPI inflation stood at 2.2% in March 2014. In quarter-on-quarter and annualized terms, the growth of the consumer price index stood at 3% and 3.4% respectively.

According to her, the increase in consumer prices recorded in March was driven by two factors: the transition of the Ukrainian economy to a flexible exchange rate regime and seasonal increases in food prices. “The transition to a flexible exchange rate regime has been prompted by the need to redress the macroeconomic imbalances built up earlier. Thus, the revival of the competitive economy has begun," explained Ms Olena Kovalenko, adding that "according to preliminary estimates by General Economic Department, the weighted exchange rate of the hryvnia versus currencies of the countries being Ukraine's main trading partners fell by 13% in March. The Ukrainian economy has now been affected by February's adjustment of the hryvnia exchange rate”.    

 At the same time, a negative GDP gap has kept prices down. Therefore, the idle production capacity enables the economy to increase output without significant price increases. The core CPI increased by 2.1% year-on-year and month-on-month.

“We expect that the transition to a flexible exchange rate regime will lead to a future pick-up in economic activity. This move will strengthen the ability of the National Bank to influence the inflation developments in Ukraine," added Ms Olena Kovalenko.