July inflation was higher than expected earlier, according to a comment released by the central bank (NBU) today. We recall that inflation had been higher than expected also in May and June. CPI inflation picked up to 15.9% y/y in July from 15.6% in June and 13.5% in May. The NBU said that upward pressure again came from prices of raw food products (25.5% y/y) and regulated prices and tariffs (27.7% y/y), while inflation pressure from fundamental factors remained low. Core inflation accelerated to 7.3% y/y in July from 6.8% in June, but that was expected, said the NBU, and that was still less than half of the headline inflation rate.
The NBU warned that risks increased that inflation would come out higher than the 6%-10% target this year. At the same time, the NBU noted that the upward factors have been temporary and should be offset later in H2 2017. We think the pension hikes planned by the government next autumn will be an additional upward factor.