NBU Governor outlines reasons for accelerated inflation

The relevant statement was made by National Bank of Ukraine (NBU) Governor Andriy Pyshnyy at a briefing, an Ukrinform correspondent reports.

“In September, inflation accelerated to 8.6% yoy, and continued to rise in October, according to the NBU’s estimates. The increase in the price pressure in H2 2024 was expected, being reflected in the NBU’s previous forecasts (Inflation Report of January, April, and July 2024). At the same time, the growth in both consumer and core inflation (7.3% yoy in September) was faster than forecast,” Pyshnyy noted.

In his words, the key factor of such dynamics was a rise in food prices following the lower-than-expected harvests of different agricultural crops and a subsequent increased cost of raw materials for the food industry.

Additionally, accelerated inflation resulted from a further increase in production costs, such as electricity and labor payments, as well as the exchange rate effects from the weakening of the Ukrainian hryvnia in previous periods.

The NBU expects that the pressure on prices will persist in the coming months. At the same time, the inflation rate will start to slow down in spring 2025.

“In the coming months, the pressure on prices will persist due to the further impact of food supply factors, increases in budget expenditures, rapid wage growth, and wider energy shortages during the heating season. As a result, inflation will hit 9.7% at the end of 2024,” Pyshnyy explained.

As estimated by the NBU, the inflation rate is likely to slow down from spring 2025. This will be driven by the NBU’s prudent monetary policy and weaker external price pressures, as well as by an improvement in the energy sector and increased harvests.

“The NBU forecasts inflation to decline to 6.9% at the end of 2025 and return to the 5% target in 2026,” Pyshnyy stressed.

A reminder that, on October 31, 2024, the National Bank of Ukraine (NBU) endorsed a decision to leave its key policy rate unchanged at 13%.