Chairman of the Council of the National Bank of Ukraine (NBU) Bohdan Danylyshyn that it is expedient to re-launch the State Price Administration with state regulations of food prices to reduce inflation in Ukraine.
"Analyzing the consequences of the government's decision to abolish the regulation of food prices, I consider it premature, since in the conditions of Ukraine's monopolized economy, it led to an increase in the inflation rate. I consider it expedient to resume the work of the State Price Administration, which would control pricing at the stage of transition of the Ukrainian economy from recession to growth. Today, the market has a very one-sided specific impact on pricing, that is the growth of consumer prices," he wrote on Facebook.
According to Danylyshyn, there is a typical demand-pull inflation in Ukraine when production costs grow due to the depreciation of fixed assets, low labor productivity, and increase in the cost of equipment, raw materials, and semi-finished products.
Read alsoIMF worsens inflation forecast for Ukraine"Because of the increase in expenses, manufacturers are forced to raise selling prices, which affect retail prices. So, an increase in the cost of production is now a key factor in consumer price growth dynamics," he wrote.
Danylyshyn noted that the NBU impact on the inflation was significant, but not decisive.
"The factors that are beyond the NBU control have a strong influence on the growth of consumer prices. The growth of administratively regulated tariffs for the utilities, as well as an increase in the prices set by producers of industrial and agricultural products are among them, along with the abolition of regulation of food prices. These factors are related to spending, so the NBU has not many tools to counter price hikes," the official said.
As UNIAN reported earlier, a pilot project on the abolition of state regulation of food prices was operating in Ukraine from October 1, 2016 to January 1, 2017.
In late December 2016, Ukrainian Prime Minister Volodymyr Groysman said the experiment with the abolition of state regulations had been justified, and did not lead to fueling inflation.
Following that, the Cabinet of Ministers of Ukraine decided to abolish the state regulation of food prices on July 1, 2017.
Inflation in Ukraine in October 2017 was 1.2% from September 2017, while it accounted for 14.6% year-over-year.
The National Bank has raised the refinancing rate from 12.5% to 13.5% per annum since October 27, after almost two-year liberalization of monetary policy.
According to NBU updated forecasts, inflation by the end of the year will slow to 12.2% against 9.1%, projected earlier.