Ukraine Inflation Levels Off, But More Rate Hikes May Be Coming
(Bloomberg) -- Ukrainian inflation ebbed last month, signaling a possible peak for the year even as central bankers remain divided over whether they need to raise interest rates further.
Consumer prices rose 10.9% from a year earlier in October, slightly slower than the previous month, data showed Tuesday. That was above median estimate of nine economists in a Bloomberg survey.
Ukraine’s central bank was one of the first in Europe to respond to soaring inflation by raising rates despite a sluggish economic recovery. While policy makers have signaled this year’s four hikes were enough to tame inflation, the minutes from the last monetary meeting showed that half of rate setters still expect more tightening to come next month.
- A further acceleration of inflation was stemmed by falling electricity costs due to a cut in household tarrifs and some food items.
- Consumer-price growth is close to the projected trajectory and backs the assumption that inflation is near its peak and will ease in the coming months, the central bank has said.
- The central bank revised its forecast and now expects higher natural gas costs in the coming months, compounding the risk of soaring energy prices on price growth.
- “Inflation may have hit plateau, as in the coming months it will be falling due to such factors as the base of comparison from last year, lower domestic prices for food amid an abundant harvest and a milder increase in utility tariffs,” said Oleksandr Pecherytsyn, chief economist at Credit Agricole Bank in Kyiv. He sees year-end inflation easing to 9.9% to 10% but expects one more 50 basis-point rate increase this year.
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