Ukraine’s CPI spiked to 60.9% y/y in Apr (from 45.8% y/y in Mar), Ukrstat reported last week
Following a 10.8% m/m rise in Mar, last month prices grew by 14.0% vs. the preceding month — record growth since Sep 1995.
A one-off hike in administratively regulated utility tariffs (agreed with IMF) is the principal CPI driver in Apr.While accounting for 11% of the CPI basket, the tariffs on average doubled vs. Mar 2015. Gas prices for households were raised by the stunning 453.4% and electricity prices were up by 33.6%. (Prices for other utility services were nearly unchanged).
We believe consumer inflation has reached its peak and retain our end-2015 CPI projection at 40%, since we think that monthly inflation rates will drop sharply in the coming months.
No monetary easing through the coming months. With NBU main policy rate at 30%, real interest rates are already deep negative. Bringing the CPI to below 10% in 2016 (as required in the IMF program) now appears to be rather challenging, in our view. We therefore expect the central bank policy to stay tight for the rest of the year, with no monetary easing expected any soon.
For more information: 12.05.2015.pdf