The acceleration of inflation in February 2014 to 0.6% does not bring a threat to the price stability in the country, although the bursting increase in it pace could have affected the economic development, an advisor to the governor of the National Bank of Ukraine (NBU) Valeriy Lytvytsky has said.
"The price situation in Ukraine remains stable. It's likely that the deflation page in the price history of Ukraine is turned, at least, until the arrival of summer seasonal effects. However, a sharp switch to the high inflation zone would have been risky," he told Interfax-Ukraine on Tuesday, March 11.
Lytvytsky said that consumer prices have not decreased for the sixth month in a row. In February 2014, inflation was the highest over the period since May 2011 and it was even more than inflation last year (0.5%).
"Consumer inflation in February is not very high: it is twice less than the average indicator for this month during the years of the existence of the hryvnia [since 1996]," he said.
He said that buying power of the Ukrainian national currency is on the price table when the monthly change in the price is less than 1% for the third year in a row, and there has not been such a precedent in the history of independent Ukraine.
Lytvytsky said that the switch to the higher inflation compared to 0.5% last year and deflation of 0.2% in 2012 could be the reflection of the price background inherent in healthy business activity.
"However, the switch to the two-digit inflation indicators, more than 10%, is a threat of the 'decompression illness.' Such swing of the inflation pressure is dangerous," Lytvytsky said.
He said that in these conditions there is a risk of returning to the period of high tax on nominal income as it was in 1990s and in the middle of 2000s.
"Such inflation will press on demand on the domestic market. The 'inflation moth' eats real income mercilessly," he said.
He added that apparent benefits from the nominal increase in the budget revenues which accompany high inflation will be connected with the increase in expenses and in general, with the rise in the cost of lives of Ukrainians.
Commenting on the impact of the situation on the currency market on the price growth, he said that the movement of prices in February weakly discounted the devaluation of the exchange rate, although devaluation started declining, and this factor is not threatening.
As for the influence of the possible increase in tariffs on the price pace, Lytvytsky said that it would be one time only and it could be covered by the summer deflation, the likelihood of which exceeds 50%, according to observations over many years.
