July inflation was above expectations because of the effect of raw food prices, but core inflation was in line with the forecasts, the NBU said in a comment published on Monday. Earlier, the statistical office reported that inflation picked up to 9.1% y/y in July after 9.0% y/y in June, while core inflation remained unchanged at 7.4% y/y.
The NBU noted that tight monetary policy and the appreciation of the currency helped keep inflation in check, as seen in lower price growth for household appliances, vehicles and personal goods, as well as stable prices of clothing and footwear. Services price growth eased slightly but remains high at 13.8% y/y, which the NBU attributed to steady consumer demand and high wage growth.
Overall, the central bank concluded that higher inflation in July was due to one-off factors related to weather conditions, while fundamental pressures are in line with the forecast. In our view this preserves good chances for another 50bp rate cut at the Sept 6 monetary policy meeting. The NBU cut its benchmark discount rate by 50bps to 17.0% last month.