Ukraine consumer prices rise 0.5% m/m in February

Ukraine’s consumer prices rose 0.5% m/m in February,
slowing from 1.0% m/m in January. The price growth was mostly driven by food,
housing and utility prices, the State Statistics Service reported on March 7.
Annual inflation slowed to 8.8% yoy from 9.2% yoy in January.

Food prices grew 0.9% m/m in February (vs. 2.1% m/m
growth in January), driven by vegetables (6.6% m/m), fruits (3.6% m/m) and
bread (1.2% m/m). At the same time, prices for eggs declined 3.6% m/m, and
prices for meat slid 0.9% m/m.

Prices for housing and utilities rose 0.5% m/m, driven
mostly by price hikes for water (1.8% m/m) and housing maintenance (1.2% m/m).

As in January, declining prices for clothing and
footwear and transportation served as restraining factors for inflation. In
particular, prices for clothing and footwear declined 3.5% m/m (vs. a 4.6% m/m
drop in January), while transportation prices slid 0.1% m/m (vs. a 1.7 % m/m
fall in January).

Core inflation (the consumer basket excluding goods
and services with the most volatile prices) slowed to 0.2% m/m growth in
February from 0.3% m/m in January. Annual core inflation slowed to 7.8% yoy
from 8.3% yoy in January.

Evgeniya Akhtyrko: February’s
trends in consumer inflation were similar to those in January. Food price
growth has been easing amid increased supply of some goods. The hryvnia
appreciation by 2.6% in February fostered declining prices for items with a
high share of imports, namely clothing, footwear and gasoline.

February’s inflation slowdown gives solid grounds to
Ukraine’s central bank to lower its key policy rate from 18.0% currently at its
monetary policy committee meeting on March 14.

We expect Ukraine’s consumer inflation to slow to
6.7% YTD in 2019 (from 9.8% YTD in 2018).