Prices as before the war: The NBU explained why inflation is reduced and what else could change

The National Bank of Ukraine states that rapid inflation may interfere with high security risks and further destruction associated with the war. In July 2023, inflation in Ukraine slowed down due to a favorable situation in the foreign exchange market. This is stated in a comment to the National Bank. It is noted that prices in Ukraine have decreased by 0. 6%last month. At the same time, the actual rates of prices were lower than the NBU forecast trajectory.

"A faster slowdown in inflation was due to a greater supply of raw food, as well as a reflection of a favorable situation in the foreign exchange market and improving inflationary expectations at the prices of individual goods, especially imported goods," - the comment reads. The National Bank added that consumer inflation in the annual dimension (p/p) continued to slow down - up to 11. 3% of 12. 8% in June. As for the lunar deflation, it was last recorded in August last year.

According to the NBU, the rise in price of processed food products continues to slow down (up to 13. 9% p/p). The National Bank believes that this process is closely linked to the further reduction of pressure from business costs, in particular on raw materials and energy, and the subsequent establishment of production and logistics chains, as well as improving inflationary expectations against the background of a stable situation in the foreign exchange market.

"The course stability has helped to reduce the growth rate of prices for products that have a significant proportion of imports in cost: among them: fish products, chocolate, coffee, juices, dried fruits, soft drinks and spices. " The rise in non -food prices also reduced (up to 10%) under the influence of improving inflation and exchange rate expectations against the background of a favorable situation in the foreign exchange market.

As a result, a slight increase in prices occurred among goods: at the same time, electronics prices decreased in annual calculation. The growth rate of services also decreased (up to 12. 4% p/p). The services of cafes and restaurants on the background of reducing pressure from business costs, as well as a stable situation in the foreign exchange market, were more expensive.

The cost of medical, veterinary, tourist services, car service, repair, gyms, hotels and hairdressers is practically more expensive. The rates of raw prices have decreased to 12. 3% p/g. Groats and flour are cheaper due to low export prices, significant grain reserves and increased production. Prices for vegetables have slowed growth due to the expansion of supply, now the cost has approached last year's indicators.

The larger supply was also moderately expensive eggs, but the price level is still exceeding last year's levels of high exports. At the same time, the meat adds to the price due to the reduction of supply against the background of adverse weather conditions, as well as the rise in price of fuel. The increase in fruit prices was also accelerated at the expense of watermelons due to the lack of their supply. Reduction of fuel prices slowed up to 10. 6% p/g.

The reason is to return VAT rates and excise duty to pre -war level. In this case, the rising fuel prices was constrained by the following factors: "Inflation continues to slow down by expanding the supply of raw food, as well as improving expectations for maintaining course stability. The latter was due, in particular, to the consistent monetary policy of the NBU aimed at preserving the attractiveness of hryvnia savings. " - said in the comment. In 2023, inflation in Ukraine will be up to 10.

6%, and in 2024 will decrease even more - up to 8. 5%in 2024. But the risks of increased inflation pressure are maintained primarily due to high security risks that adversely affect expectations, as well as further destruction associated with war. We will remind, on August 10 the chairman of the Tax Committee of the Verkhovna Rada of Ukraine Danilo Getmantsev stated that the trend on slowing of inflationary processes in Ukraine will remain in the last month of the summer of 2023.