Ukraine reports inflation at 0.9% m/m, 13.6% y/y in November

Ukraine reports inflation at 0.9% m/m, 13.6% y/y in November
Ukraine's inflation up 0.9% month-on-month, or 13.6% year-on-year in November
By bne IntelliNews December 12, 2017

Ukraine's consumer prices rose 0.9% month-on-month, or 13.6% year-on-year in November, following a 1.2% m/m (14.6% y/y) growth in October, according to the Ukrstat state statistics agency.

In January-November, CPI increased 12.5% YTD. Earlier, the National Bank of Ukraine (NBU) was forced to revise upwards inflation forecast for 2017 to 12.2% YTD from 9.1% YTD.

In late November, the NBU increased its key policy rate by 1 percentage point to 13.5% with the aim of tightening its monetary policy, which could "contribute to lowering headline inflation and bringing it closer to the target in 2018", according to the regulator.

"Tighter monetary policy will help curb inflation through several channels," the NBU said in a statement. "A rise in the key policy rate will facilitate an inflow of savings into the banking sector and, therefore, restrain consumer demand. Also, higher interest rates make financial instruments in domestic currency more attractive than those in foreign currency, which will have a positive effect on inflation via the exchange rate channel."

Alexander Paraschiy at Kyiv-based brokerage Concorde Capital underlined in a research note on December 11 that for the second time this year, the inflation trend has exceeded the central bank's target.

"Now we already have 12.5% CPI growth for January-November, which will end up at 13.0% YTD by December in the best-case scenario," Paraschiy added. "Against this backdrop, we see a high likelihood for a policy rate increase of 0.5-1.0pp to 14.0%-14.5% at the December 14 NBU board meeting."

Meanwhile, the NBU expects the consumer price index in 2017 to grow more than the forecasted earlier 12.2%. "The growth of the consumer price index and its components in November exceeds the forecast in the Inflation Report for October 2017 and shows that by the end of 2017 the index growth will deviate more significantly from the target than previously expected," the regulator said in a statement published on December 11.

Concorde forecasts 8.9% YTD CPI growth (11.4 y/y) in 2018.