Ukrainian Inflation Stabilizes But Central Bank Remains Hawkish

(Bloomberg) -- Ukrainian inflation continued to ease in last month of 2021, but high energy prices and the continued risk of a war with Russia are keeping the central bank focused on lifting borrowing costs further.

Consumer prices rose 10% in December from a year earlier, data showed on Monday, decelerating from the previous month and slightly below the median estimate in a Bloomberg survey. Prices were up 0.6% from November.

While inflation in Ukraine has been easing since a peak in September, the global energy crunch and concerns of war that have battered the hryvnia have kept the central bank on its monetary-tightening path. The bank raised the benchmark for the fifth consecutive time in December and signaled more tightening to come. The next rate decision is scheduled for Jan. 20.

• Inflation slowed mostly due to the base effect caused by a jump in the indicator in December 2020 and government measures aimed at shielding households from higher energy costs.
• Cabinet of Ministers took measures to tame inflation by capping prices for bread and natural gas consumed by staple food producers.
• “Headline inflation will keep trending lower in the coming months, thanks to a growing comparison base and the expected stabilization in global prices for key agricultural commodities,” said Olena Bilan, Chief Economist at Dragon Capital. “However, producers face a sharp upsurge in energy costs and will be passing them on to final consumers. This will curb the pace of disinflation.”

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