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NBU reports controlled inflation, expects it to slow down from Q2 2023
KYIV. Dec 8 (Interfax-Ukraine) – The National Bank of Ukraine (NBU) reported controlled inflation, which accelerated to 26.6% year-on-year in October, and expects it to slow down from the second quarter of 2023, the NBU website reported on Thursday.
"The growth of consumer prices in Ukraine in October accelerated to 26.6% year-on-year. According to preliminary estimates of the NBU, in November inflation continued to grow, but at a lower rate than expected in the October forecast … Inflation dynamics remains controlled … In the second quarter of next year, a cycle of annual inflation slowdown is expected to begin," the report says.
It is indicated that the main factors of inflation acceleration are the consequences of military operations and the occupation of certain regions of Ukraine, which affects the increase in production costs of businesses and leads to a shortage of certain products.
The gradual strengthening of monetary conditions after the June increase in the key policy rate to 25% and the fixing of the official hryvnia exchange rate play an important role in stabilizing inflation expectations.
The NBU expects that after an inflationary surge caused by a full-scale war, consumer price growth will slow down next year, which should primarily be facilitated by a reduction in security risks due to the successful actions of the Armed Forces of Ukraine.
In addition, from the beginning of 2023, a complete cessation of emission financing of the budget is expected.
At the same time, the NBU does not expect a rapid slowdown in inflation amid the war, as the Ukrainian economy will continue to function for a long time in conditions of limited logistics and a shortage of electricity.
The weakening of consumer demand may partially offset the inflationary effects of rising business production costs. Consequently, inflation will decline rather slowly and in 2023-2024 will significantly exceed the NBU’s target of 5%.
