Ukraine’s Inflation Steadies on Price Cuts Amid Blackout Fears
(Bloomberg) -- Ukraine’s wartime inflation steadied last month as retailers cut prices for perishable goods after Russian attacks on the nation’s power grid triggered concerns that staple foods would spoil.
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Consumer prices rose 26.6% versus a year earlier in December, the State Statistics Service said on Tuesday. The result was below the 27.4% forecast in a Bloomberg survey. A better-than-expected harvest of vegetables and fruits last fall also helped, the central bank said in a statement to Bloomberg.
While inflation quickened since November to a six-year high, it remained below the central bank’s 28% forecast. Among drivers were retailers cutting prices on perishable goods such as meat over lower demand and worries that lasting blackouts would destroy food supplies, according to the central bank.
“The supply of selected food staples increased temporarily due to electricity-supply disruptions, while producers and retailers were slow in passing through the costs of autonomous electricity-generating equipment to end consumers,” said Olena Bilan, the chief economist at Dragon Capital. “This suggests that inflationary pressures will remain strong in early 2023.”
According to the central bank’s projections, inflation will cool to 20.8% next year. Policy makers will review that outlook later this month when they meet for a new decision on rates.
Price growth has soared since Russian President Vladimir Putin invaded in February 2022, which drove the hryvnia lower against the dollar and prompted the central bank to prop up the state budget. Since mid-summer, however, inflation has accelerated more slowly than expected following an emergency interest-rate hike and other monetary tightening.
In October, Russia began to deliberately shell Ukraine’s energy infrastructure, seeking to plunge the nation into darkness. While the resulting blackouts raised costs for businesses, they also curbed consumer demand.
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