The tight monetary policy of the National Bank of Ukraine was the main reason for the slowing of inflation in 2018 and decrease to 9.8%, a five-year low.
As noted in the NBU, the inflation decrease indicates the reversal of the trend of inflation, which was observed in 2017, and the weakening of fundamental inflationary pressure on the Ukrainian economy.
A gradual increase in interest rates began in October 2017 given the increasing inflationary risks. In the past year to reduce inflation to the targets in the medium term, the NBU four times increased the rate by only 3.5 percentage points to 18% per annum. This led to higher interest rates and, accordingly, given the incentives to increase savings. In addition, this has led to the strengthening of the hryvnia against the currencies of major trading partners of Ukraine.
“The slowdown in inflation was due to favourable price conditions for Ukrainian exports on foreign markets in the first half of the year and a record grain harvest in the second half, which supported high supply of currency on the interbank foreign exchange market, and created conditions for strengthening the hryvnia,” — said in the comments of the regulator.
We will remind, in December in Ukraine has slowed significantly, inflation and rising prices. Last year prices for food products increased by 10%.