““In order to preserve the attractiveness of hryvnia assets, the stability of the foreign exchange market and the reduction of inflation, the NBU will maintain relatively tight monetary conditions””, — write: www.radiosvoboda.org
The institution records a decrease in inflation in recent months, but inflationary expectations remain high, and pro-inflationary risks, in particular, related to the growth of the energy deficit and budgetary needs, have intensified.
“Under such conditions, in order to maintain the attractiveness of hryvnia assets, the stability of the foreign exchange market and the steady trend of reducing inflation to the 5% target on the policy horizon, the NBU will maintain relatively tight monetary conditions. Inflation is declining, but fundamental price pressures remain stable, and expectations show no signs of sustained improvement,” the report said.
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The National Bank records a slowdown in consumer inflation to 11.9% year-on-year in September. This trend continued in October. Although the rate of growth of consumer prices slowed down ahead of the NBU’s July forecast, this is primarily due to the expansion of the supply of vegetables thanks to better harvests compared to last year.
At the same time, core inflation decreased at a more moderate pace – up to 11% y/y in September. Fundamental price pressures remained stable, in particular due to the persistence of high business costs for labor and energy resources. As a result, rates of price growth for a number of components of core inflation decreased slowly or did not decrease at all.
The National Bank reminds that its monetary policy is aimed at reducing inflation to the target of 5% over the policy horizon. The slowdown in inflation will be facilitated by the transfer to consumer prices of the effects of this year’s vegetable and grain harvests, the further increase in harvests assumed by the NBU forecast, and monetary policy measures to maintain interest in hryvnia assets and the stability of the currency market.
The regulator also expects a partial reduction of imbalances in the labor market, which will affect the slowdown in real wage growth and, accordingly, the easing of pressure on enterprise costs. At the same time, the slowdown in inflation will restrain additional expenses of enterprises to ensure smooth operation in conditions of electricity shortages and high rates of increase in administratively regulated prices.
“According to the NBU’s forecast, inflation will decrease to 9.2% in 2025, to 6.6% in 2026 and to the target of 5% at the end of 2027,” the report says.
Therefore, the National Bank states that the growth of the economy continues, but its pace will remain restrained due to the consequences of the war
The base scenario of the NBU’s October macro forecast assumes that the discount rate will begin to decrease in the first quarter of 2026. The next meeting of the board of the National Bank on monetary policy will be held on December 11.
