Ukraine’s National Bank revises inflation forecast upward to 9.7% for 2024, 6.9% for 2025

The National Bank of Ukraine (NBU) revised its inflation forecast for 2024 from 8.5% to 9.7% and for 2025 from 6.6% to 6.9%.

"In the coming months, the pressure on prices will persist due to the further impact of food supply factors, increases in budget expenditures, rapid wage growth, and wider energy shortages during the heating season. As a result, inflation will hit 9.7% at the end of 2024," NBU Governor Andriy Pyshnyy said at a press briefing on Wednesday.

He noted that inflation will start to decline in spring 2025, driven by the NBU's prudent monetary policy, weaker external price pressures, an improvement in the energy sector, and an increase in harvests.

The NBU forecasts inflation to decline to 6.9% at the end of 2025 and return to the 5% target in 2026.

Pyshnyy added that in September, inflation accelerated to 8.6% year-over-year, and continued to rise in October.

"The increase in the price pressure in H2 2024 was expected, being reflected in the NBU’s previous forecasts (Inflation Report of January, April, and July 2024). At the same time, the growth in both consumer and core inflation (7.3% year-over-year in September) was faster than forecast," he said.

The NBU Governor attributed this trend to an increase in food prices on the back of smaller-than-expected harvests of various crops, and the related growth in the cost of food industry inputs.

Additionally, inflationary acceleration was driven by further increases in production costs, including the costs of electricity and labor, as well as by exchange rate effects from the weakening of the hryvnia in previous periods.

"The pressure on prices will persist in the coming months, but inflation will start to slow in spring 2025," the central bank governor concluded.