Inflation in August: No sign of abating

Макроэкономика 08.09.2014 Month-on-month headline CPI and PPI rose 0.8% and 2.6%, respectively, in August. The hryvnia's extended weakness most likely caused higher petrol prices that pushed up other components that involve transportation. In the producer price segment, the war in Donbass caused disruptions in established supply chains that resulted in supply side shortages. In year-on-year terms, CPI and PPI accelerated to 14.2% and 24.2%, up 1.7ppts and 1.8ppts, respectively. The ongoing war in Donbass despite last Friday's ceasefire and uncertain FX expectations should sustain high, unabated and accelerating inflation. In the current environment, the Ukrainian debt crisis is not expected to subside, and the 5yr CDS should remain at around 1,000bp.