Inflation in September: Disinflation diverges in consumer and producer price indices

Макроэкономика 07.10.2015 While last month showed prices appeared to be following a general trend since mid-summer with year-on-year inflation subsiding, this month's statistics show that consumer and industrial inflation were subsiding at different paces with monthly CPI and PPI rates were rather high at 2.3% and 2.0%, respectively. However, when monthly rates are annualized, CPI slowed down from this year peak of 60.9% to 51.9% while PPI was subsiding more aggressively from 51.6% to 32.5%, most likely because of the impact of the global economic slowdown and associated decline in commodities. CPI has remained resiliently above the 50% threshold through September. Overall, inflation is still high and erodes households' capacity to save in local currency. It also has quickly erased most of the economic competitiveness when measured by the hryvnia's trade-weighted indices. With inflation at this level, it will be difficult for authorities to retain their FX policy stance (the de facto unofficial band) through the end of the year.