NBU expects inflation to decline significantly in H1 2023

This is said in a quarterly inflation report released by the National Bank of Ukraine (NBU).

“With monetary conditions being tight, global inflation declining, and domestic demand staying subdued, Ukraine will see its inflation rate slow to 14.8% this year. Specifically, inflation is expected to drop sharply in H1 2023. In H2, the pace of growth in consumer prices will remain almost flat, primarily due to unevenly distributed base effects and the announced return of fuel taxes, which are intended to reduce pressure on public finances,” the report says.

In addition, the NBU projects that inflation will fall to 9.6% next year, and to 6% in 2025. Weakening of inflationary pressure is expected taking into account the assumption of a decline in security risks from the beginning of 2024, as envisaged in the outlook, the continues recovery of logistics and production capacities, and the consistent monetary policy of the NBU

However, the regulator stresses that monetary conditions will remain rather tight for a protracted time even if cuts to the key policy rate begin in Q4 2023.

“This is due to the expected pullback in inflation and a resulting increase in the real yield on hryvnia-denominated instruments. Consistent monetary policy, aimed at preserving the attractiveness of hryvnia savings, will make it possible to maintain exchange rate sustainability, including when FX restrictions are eased,” the report says.

As reported, according to Governor of the National Bank of Ukraine Andriy Pyshnyy, Ukraine has entered a stable disinflationary trend, which makes it possible to suggest a further decrease in inflation.