February CPI Rise of 0.9% Leaves Headline Inflation at 14%

March 23, 2018

Ukraine’s State Statistics Committee (UkrStat) reported that rolling 12-month consumer inflation slowed marginally, to 14.0% YoY in February from 14.1% YoY in January, according to official data released earlier this month. UkrStat reported that CPI inflation during the month of February alone was 0.9%. For 2M18 the CPI index growth was 14.1% YoY.

The pace of consumer inflation in Ukraine has consistently been running somewhat above the government’s target of around 10% annually, and this led to a toughening of monetary policy by the National Bank, which last month raised its key refinancing rate from 16.00% to 17.00%.   
In the main consumer basket categories, the highest price growth in February was registered in fruits (+6.8% MoM) and in housing services (+2.2% MoM). Food and beverage prices rose 1.0% MoM in the period. Meanwhile, the utility service category, which has contributed the lion’s share of overall inflation in Ukraine in recent years, edged up 0.4% MoM in February.  
For March, we see no reason for inflation acceleration, and we project that the CPI will increase by 0.4% MoM, which would imply a slowdown in 12-month “headline” inflation from 14.1% to 13.5%.
The main reason to expect slower inflation in March is strength in the hryvnia. The Ukrainian currency has gained 5.0% to 26.40 UAH/USD since the beginning of February.

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