The headline CPI inflation at 9.9% y/y in June, down from 11.7% in May and 13.1% in April, was somewhat lower than projected in April, the central bank (NBU) has said in its monthly inflation commentary. We recall that inflation was lower than expected also in May. The NBU did forecast disinflation, but at a slower pace. As in May, the NBU attributed a lower than expected inflation to fast food disinflation on the back of good weather conditions and growing food imports. Tough monetary policy, which prompted appreciation of the national currency, also pushed prices down, said the NBU. Inflation pressures remained significant, judging by core inflation at 9.0% y/y in June, down from 9.3% in May, said the NBU. At the same time, the NBU said that was also lower than expected.
A new inflation forecast for 2018-2020 will be announced after the rate-setting meeting on July 12, said the NBU. Thus far the NBU has expected that inflation will slow down to 8.9% y/y by end-2018. Given the lower than expected inflation in Q2’18, the NBU is likely to slightly amend both its forecast and its benchmark discount rate, which has been stable at 17.0% since March.