The National Bank of Ukraine (NBU) has revised its 2021 inflation forecast from 8% (in its April forecast) to 9.6%, and expects that inflation will return to 5% in H2 2022.

"With global prices surging and demand recovering further, the NBU has revised its 2021 inflation forecast from 8% to 9.6%. After peaking in the fall of this year, inflation will begin to slow as the new harvest arrives and global energy prices adjust… inflation in H2 2022 will decline to its 5% target and remain there going forward," the NBU said on its website on Thursday.

Inflation will soon rise to slightly above 10%, but it will weaken at the end of 2021 and return to its 5% ± 1 pp target range in H2 2022.

The rise in inflationary pressure, including its fundamental component, is also driven by the dynamic recovery of the economy, as evidenced by monthly and other high-frequency indicators. By tightening its monetary policy, in particular through raising its key policy rate and rolling back its emergency monetary measures, the NBU will also keep inflation expectations under control and gradually reduce underlying inflationary pressures.