Price paradoxes: why inflation does not fit the rules

In June, the rate of inflation growth slowed slightly. The inflation rate increased by 0.8% month-on-month and amounted to 14.3% year-on-year (versus 1.3% and 15.9% in May, respectively).

Our average monthly inflation rate has been at +1% for a year now. The June decline in inflation was insufficient to reach the NBU's forecasts for the first half of 2025. The NBU's April forecast predicted inflation of 13.8%, while the forecast from a year ago was 9.8%. Thus, the error of the NBU's inflation forecasts on the 2-month horizon is 4%, and on the annual horizon – 32%.

Structure of Inflation. The variation in price growth in terms of individual goods and services is more than 30 percentage points, which indicates the dominance of non-monetary (situational) factors in inflation dynamics.

Utility prices (electricity, gas, heating, and water) have remained fixed for a year now. The impact of the devaluation-inflationary spiral on inflation has been significantly reduced (the annual devaluation of the hryvnia against the US dollar was only +3%).

However, the inflationary baton was intercepted by food products: price increases of more than 20% were recorded for eggs (+59%), bread (+22%), vegetables (+24%), fruits (+52%), butter (+28%), sunflower oil (+34%), milk (+21%), and meat (+23%).