Deflation in Ukraine stood at 0.1% month-on-month in August following a 0.2% m/m inflation in July; Ukraine's inflation stood at 16.2% in annual terms, the state statistics service Ukrstat reported on September 8.

In August, food prices dropped 0.6% m/m (0.3% m/m growth in July) on the back of sliding prices for vegetables (-21.5% m/m) and fruits (-5.7% m/m), according to a research note published by Kyiv-based brokerage Concorde Capital on September 11.

 Utility prices eased to 0.3% m/m growth vs. 0.6% m/m in the prior month. Healthcare prices also slowed to 0.2% m/m growth vs. 0.5% m/m in July. Prices for clothing and footwear kept on falling (-2.4% m/m vs. -4.4% m/m in July).  Transportation prices sped up to 0.8% m/m growth from no growth in the prior month. Education prices inched up by 0.1% m/m vs. flat prices in July.

In September, the National Bank of Ukraine (NBU) said the regulator sees "increased risks" to financial stability due to the fact that inflation may deviate more significantly from the mid-point of the central bank's target range, namely 8% ± 2 pp.

The NBU attributed the situation to "the rapid increase in the prices of vegetables and fruit due to adverse weather conditions and the reduction in the supply of meat and dairy products on the domestic market." At the same time, fundamental pressure on inflation remains moderate, in particular due to low volatility in the currency market and the stabilisation of inflationary expectations.

Earlier, the NBU was forced to revise its inflation forecast upward from 8% to 9.1% in 2017. The move was attributed primarily to the minimum wage rise increase to UAH3,200 (€110), which took effect from the beginning of the year.