Inflation in Ukraine will rise in the coming months due to the continued impact of last year's poor harvests and increased production costs for enterprises. This is reported by UNN citing the NBU.
In January, inflation accelerated to 12.9% year-on-year. According to NBU estimates, it continued to rise in February. The acceleration of consumer inflation was primarily due to the influence of temporary factors. Such trends were expected and generally aligned with the NBU's forecast (Inflation Report for January 2025)
At the same time, the influence of fundamental inflationary factors was strengthening due to the further reflection in prices of increased costs for enterprises on energy resources and labor payments, as well as the maintenance of quite strong consumer demand. As a result, core inflation accelerated sharply, outpacing forecast estimates, primarily in the 'services' component.
It is noted that inflationary and exchange rate expectations of economic agents had divergent dynamics, but overall remained relatively stable. This was facilitated by the NBU's previous measures to maintain the stability of the currency market and protect hryvnia savings from inflationary depreciation.
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They, in particular, affected the reduction in the volumes of net currency purchases by businesses and the population in February, as well as the preservation of demand for hryvnia instruments for savings. Moreover, at the beginning of the year, inflation expectations of the population improved. At the same time, statistics on search queries indicate that attention to the topic of inflation remains heightened. This, against the backdrop of a potentially prolonged period of high inflation rates, may negatively impact inflation expectations and strengthen price pressure resilience.
It is also reported that the NBU's measures will contribute to reducing inflation to the target of 5% on the policy horizon.
Inflation will rise in the coming months due to the continued impact of last year's poor harvests and increased production costs for enterprises. At the same time, the measures taken by the NBU to strengthen monetary policy will limit fundamental price pressure, while the arrival of new harvests in the summer will slow down the rise in food prices
It is noted that thanks to the NBU's measures and the gradual exhaustion of the influence of temporary inflation drivers, it is expected to return to a trajectory of slowing down in the second half of the year and decrease to a single-digit level by the end of the year. On the policy horizon, inflation will decrease to the target of 5%.
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