Ukraine's consumer inflation rate declined to 11.3% in July due to an increase in food supply and improved expectations of currency stability. According to the National Bank of Ukraine (NBU), inflation also slowed in August, primarily due to an increase in the supply of newly harvested vegetables and fruits.

This is reported by RBC-Ukraine with reference to the NBU's Macroeconomic and Monetary Review (September 2023).

The NBU experts do not provide figures for inflation in August, but according to the published schedule, inflation slowed to about 10%. The last time annual inflation in Ukraine was below 10% was in June 2021 (9.5%).

As noted in the review, the underlying inflationary pressures have been decreasing in line with the NBU's expectations. This was driven by improved expectations in the context of exchange rate stability and reduced pressure from businesses.

Meanwhile, food prices continued to grow slowly, thanks to an increase in supply, easing cost pressures, and optimization of production and supply chains.

"More optimistic expectations for the new grain harvest, together with increased production, helped to reduce prices for cereals and flour. Despite the increase in external prices, the rise in domestic sunflower oil prices slowed, in particular due to difficulties with its export," the review says.

Vegetable prices also declined due to increased supply. Due to higher production, eggs moderately rose in price, although their price remained higher compared to last year due to higher exports, the NBU added.

Fuel prices gradually rose in July due to significant stocks formed before the excise tax increase. The rise in prices was restrained by global oil prices in the previous months, as well as increased competition in the retail market. In August, fuel prices continued to rise as stocks were being depleted.

In addition, price increases for alcoholic beverages and tobacco products slowed amid favorable FX market conditions and shadow supply pressure. The moratorium on raising a number of tariffs for housing and communal services for the population continues to restrain administrative inflation, the review notes.

As a reminder, consumer prices in Ukraine in July 2023 increased by 11.3% compared to July last year. In monthly terms, prices decreased by 0.6% in the summer.

The National Bank of Ukraine has significantly improved its inflation forecast. The NBU expects consumer price growth to reach 10.6% by the end of 2023. In April, the NBU forecast inflation at 14.8%.