NBU improves inflation forecast for 2020 to 4.1%, worsens for 2021 to 6.5%
The National Bank of Ukraine (NBU) has improved its inflation forecast for 2020 from 4.7% (in the July forecast) to 4.1%, while worsened it for the next year from 5.5% to 6.5%.
"Considering the weak dynamics of consumer prices in Q3, the NBU has revised its annual inflation forecast downward, to 4.1%... Consumer inflation will increase to 6.5% in 2021, influenced by the continued economic recovery, this year's hryvnia depreciation, and a large hike in the minimum wage [from January 1 from UAH 5,000 to UAH 6,000] that will boost domestic demand," the National Bank said on its website said on Thursday.
The National Bank said that The accelerated growth in prices at the end of this year will be primarily driven by a further recovery in economic activity amid sustained loose monetary and fiscal policies and by an increase in energy prices.
"The last year’s low comparison base will also have a notable statistical effect on annual inflation estimates," the regulator said.
According to the report, inflation will cross the upper bound of the target range only temporarily. The NBU may let inflation deviate from the target for a short period of time in order for the economy to return to steady growth sooner. At the same time, the NBU will apply monetary tools to bring inflation back to the target range in 2022.
According to the forecast of the central bank, Inflation will reach the lower bound of the 5% ± 1 pp target range by the end of 2020 and will accelerate further on.