Ukraine consumer inflation slows to 0.9% growth in February

Ukraine’s consumer prices grew 0.9 m/m (14.0% yoy) in
February, slowing down from 1.5% m/m (14.1% yoy) growth in the prior month, the
State Statistics Service reported on March 7. Food price growth decelerated to
1.0% m/m from 2.0% last month, while another major CPI driver – transportation
prices – slowed to 1.5% m/m growth from 3.0% m/m. Utility prices increased 0.4%
m/m, showing the same growth pace as in the prior month. Prices for clothing
and footwear declined 2.8% m/m, continuing the downward trend (-3.9% m/m in
January).

Core inflation (the consumer basket excluding goods
and services with the most volatile prices) slid to 0.6% m/m growth (9.7% yoy)
from 0.7% m/m (9.8% yoy) in January.

Evgeniya Akhtyrko: The
slowdown in price growth on a year-over-year basis was negligible in February
owing to high inflationary dynamics throughout the previous year. The absence of
significant changes in core inflation implies that the current inflation is
caused by both monetary and non-monetary factors. Having expected February’s
results, Ukraine’s central bank further tightened the monetary conditions by
hiking the key policy rate by 1.0pp to 17% starting March 2,
hoping to alleviate the monetary factors of inflation.

We do not expect consumer inflation to slow down significantly until 2H18, when the positive effects
of tight monetary policy amid increased food supply start to show up. CPI will
increase 8.9% YTD, or 11.8% yoy in 2018, according to our projections.