The National Bank explained why inflation accelerated to 12.9% in January. The inflation rate in Ukraine, which reached 12.9% in annual terms in January, turned out to be higher than the National Bank of Ukraine’s recently published forecast.
The NBU press service explained that actual inflation exceeded the NBU forecast due to three main reasons: a more significant than expected increase in administratively regulated prices for goods and services; a faster increase in the cost of market services; as well as tax and regulatory changes.
The NBU remains confident that inflation will return to a decline in the second half of 2025 and will move towards the target of 5%.
The main factors behind the price increase in January were:
→ raw food prices rose by 11.8%;
In January, the annual growth rate of raw food prices slowed for the second month in a row. Record-breaking warm weather in January contributed to an increase in the supply of eggs and milk. The supply of vegetables and fruits expanded due to increased imports. In contrast, prices for pork, chicken and sugar approached those of trading partner countries amid stable exports. The rise in prices for flour and cereals also continued, influenced by the effects of last year’s low harvests.
→ core inflation accelerated to 11.7%;
The increase in the price of processed food products in January was 15.9% year-on-year. The acceleration in price growth is explained by an increase in the purchase prices of raw materials, as well as production costs of enterprises for electricity, labor and logistics. As a result, prices for bread, bread and meat products, and oil increased rapidly. Due to the increase in prices on world markets, the price of certain imported goods, in particular cheeses, tea, coffee and chocolate, became more expensive. At the same time, prices for fermented milk products and butter stabilized due to a decrease in purchase prices for raw milk against the background of an increase in supply.
Prices for non-food products accelerated their growth to 4.3% year-on-year due to exchange rate effects in previous periods. At the same time, prices for clothing and footwear remained lower than last year.
The growth rate of the cost of services was 14.2%, also accelerating in January compared to December. This is partly explained by the revision of tariffs, in particular their increase by individual mobile operators, the updating of the list of paid medical services in state and municipal institutions, and a change in approaches to calculating the cost of the OSCPV policy.
→ administratively regulated prices increased by 17.5%;
In January, the cost of excisable products grew faster due to the adjustment of alcohol prices, and tobacco products became more expensive, probably due to the expected increase in excise duties. The growth of prices for pharmaceutical products, medical goods and equipment accelerated under the influence of pressure from production costs. The cost of local telephone communication also increased. At the same time, the moratorium on raising tariffs for certain housing and communal services for the population continued to restrain administrative inflation.
→ the growth rate of fuel prices was 12.1%;
In January, the growth of fuel prices significantly accelerated compared to December under the influence of an increase in the cost of raw materials, an increase in excise duties and logistical problems due to storms in the Black Sea at the beginning of the year. At the same time, a more significant increase in fuel prices was restrained by competition between gas station networks against the background of quite seasonally low demand.
The National Bank warned that high inflation would persist for several more months, but in the second half of the year it would decline.
In connection with the acceleration of inflation, the NBU raised the discount rate to 14.5% and plans to raise it further.
