Ukraine’s Consumer Inflation Stands at 6.5% YoY in October Declining from 7.5% in September

November 18, 2019

Ukraine’s State Statistics Committee (UkrStat) reported that rolling 12-month inflation stood at 6.5% in October slowing from 7.5% consumer inflation registered in September. However, on a monthly basis, there was a rise in the consumer price index by 0.7% as prices for vegetables grew by 4.6% MoM and for bread products increased by 1.5% MoM. For 10M19 (which is an average measurement of inflation for the last 12-month) the CPI index growth was at 8.6% YoY.

The CPI finally fell into trajectory declared by the National Bank in the medium term monetary policy. A draft bill for central budget for 2020 currently includes a forecast of consumer inflation of 6.0%. In case energy prices do not go up sharply on global markets we assume that consumer inflation in Ukraine has all the chances to slowdown below 5% by the end of next year. In our view, the fresh inflation figure will be a strong argument for the National Bank for cutting its key refinancing rate further from 15.50% to the target rate of 8.00%. Next meeting of the National Bank’s monetary board is scheduled for 12 December. We expect that the key rate will be lowered by 150 bps to 14.00%. Primary local UAH-denominated bond market has already reacted on expectations of lower interest rate with the Finance Ministry placing 1-year debt papers at 13.75% at the weekly auction held on Nov 12.   

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