"The impact of the shift in the hryvnia strengthening to consumer prices has proved to be much stronger than previously estimated by the National Bank. […] The hryvnia strengthening helped reduce imported inflation, improve inflation expectations and reach the target previously declared in 2019. Thus, the quantitative target for CPI [consumer price index] growth at the end of the year, which was foreseen by the fundamental principles of monetary policy for 2019, has been reached for the first time over the past three years," Danylyshyn wrote.
He noted that according to all official macroeconomic projections of the National Bank of Ukraine in 2019, inflation was expected to return to the upper limit of the target range in the first quarter of 2020 and to the mid-term target of 5% at the end of 2020. However, inflation's actual return to the target occurred four quarters earlier - in November 2019.
"This may be explained by the underestimation by the [NBU] Board of the impact of the hryvnia revaluation on the slowdown in inflation and the realization of several positive shocks (a record crop of grain and oilseeds, a significant inflow of debt capital, a fall in world energy prices)," Danylyshyn said.
According to NBU Chief Yakiv Smolii, inflation in November 2019 decelerated rapidly, even faster than expected by the NBU, to 5.1% year-on-year. Thus, the medium-term target of 5% declared in 2015 was reached.
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