Even though consumer price growth in April was less than anticipated by the central bank, the National Bank of Ukraine (NBU) foresees a moderate acceleration in the near future. The NBU acknowledged, “The difference from our projection mainly stemmed from unforeseen, short-term factors, most notably a more significant decline in raw food prices. Favorable weather conditions and a reduction in business costs linked to last year’s abundant harvests, as well as producers focusing more on the domestic market due to blockades on western borders, played a role,” the NBU remarked. However, this slowing effect on inflation is expected to dissipate, leading to increased rates due to rising wages and the expansion of inflation’s regulated components. Nevertheless, the pressures of inflation will be mitigated by the decreasing impact of external price factors and the monetary policy actions implemented to maintain a stable FX market condition and shield consumer savings from the effects of inflation. The monetary policy’s objective remains to manage inflation effectively and bring it back to the target corridor of 5% ± 1 percentage point in the subsequent years.
FAQ Section
Why was consumer price growth in April lower than predicted by the NBU?
According to the NBU, the lower consumer price growth was due to temporary factors that were difficult to forecast, primarily the more substantial reduction in prices for raw food products resulting from favorable weather and decreased pressure on business costs related to last year’s substantial harvests.
What factors are expected to cause inflation to accelerate?
Inflation is expected to accelerate due to the diminishing effects of the decrease in raw food prices, rising commercial wage spending, and an increase in the regulated components of inflation.
What measures are being taken to control inflation?
The NBU plans to continue using monetary policy measures to reduce external price pressures, maintain a stable situation in the FX market, and protect consumer savings from inflation, with a goal to moderate inflation and bring it back to the target range within the next few years.
Conclusion
The National Bank of Ukraine, while acknowledging a slower than expected inflation rate in April, forecasted a moderate increase in consumer price growth in the months ahead. The central bank highlights both the temporary factors that led to the initial lower rate, such as unexpected drops in raw food prices, and the upcoming influences that may drive inflation rates upward, including salary increases and regulated inflation components. In light of this, the NBU remains committed to employing its monetary policy toolkit to keep inflation in check, aiming to maintain price stability over the long term and return inflation rates to within the set target range.