NBU points out risk that inflation in 2017 to exceed target

The pace of consumer price index and its elements in May shows that there is a risk that inflation in 2017 would exceed the target, according to a posting on the website of the National Bank of Ukraine (NBU).

"The real inflation level in May – both in monthly and annual terms – was higher than the NBU's forecast. This is linked first to the high pace of growth of raw food and larger influence of administrative factors," the central bank said.

The NBU said that in general, the rise of prices of raw food was expected. However, the pace of their price growth outstripped the central bank's forecast.

"Growth of prices of meat and milk in annual terms accelerated, as global prices were higher and exports expanded. Growth of price of raw foods resumed over bad weather," the NBU said.

As for administrative factors, regulated tariffs growth increased. First of all, it is linked to the increase of cold water and sewage tariffs from May 12. Price of tobacco accelerated in May over problems with distribution.

Acceleration of underlying inflation in May was unexpected, while the figure was lower than the forecast thanks to improvement of inflation expectations along with the strengthening of the hryvnia exchange rate to the U.S. dollar.

The underlying inflation accelerated due to secondary effects from the increase of prices of raw food.