Ukrainian Inflation Quickens Though Rate Cuts Likely to Persist

  • Consumer prices rose 7.9% in July after 6.9% advance in June
  • Inflation increase is driven by costs for utility services

Ukrainian inflation quickened for the first time in eight months after the government raised utility tariffs, though price increases remained below the central bank’s full-year target and the uptick is unlikely to derail four months of interest-rate cuts.

Consumer prices advanced 7.9 percent from a year earlier in July, compared with a 6.9 percent gain the previous month, the State Statistics office said Monday on its website. The median estimate of six economists in a Bloomberg survey was for a 7.5 percent increase. Prices fell 0.1 percent from June.

Ukraine’s economy is healing after revolution and military conflict ravaged the currency and prompted the government to seal a $17.5 billion international bailout. Slowing inflation, which peaked at 61 percent in April 2015, has allowed monetary-policy makers to trim their benchmark interest rate, lowering it to 15.5 percent from 16.5 percent last month and pledging further easing if price pressures continue to ease.

“The central bank will continue monetary-policy easing if inflation is driven only by utility tariffs,” Konstantin Fastovets, an economist at Adamant Capital in Kiev, said by phone before the data were released. “At 15.5 percent, the key policy rate is too high. It’s very difficult for the economy to expand if the policy rate stays at that level.”

The bank is also facing further upward price pressure from the government when heating tariffs are raised in the autumn. It has set a 12 percent inflation goal for 2016.

Producer prices rose 18.3 percent from a year earlier in July, advancing 4.3 percent from June, the statistics office said.

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