Ukraine’s consumer prices dropped 0.3% m/m and to 2.4% y/y in February on the back of cooling prices for food, housing and utilities, and clothing and sportswear, the State Statistics Service reported on March 10.

The National Bank of Ukraine (NBU) scored a major success in 2019 by taming inflation, which has dropped precipitously over the last year and allowed the regulator to make a series of deep rate cuts.

The central bank was expected to continue its easing at this month’s monetary policy meeting, but those cuts are in danger after Ukrainian president Volodymyr Zelenskiy’s March 4 government reshuffle which unsettled investors and the series of shocks to the Ukrainian economy from tumbling oil prices and the growth of the coronavirus pandemic.

Food prices declined 0.4% m/m in February (after rising 0.5% m/m in January), driven mostly by eggs (-17.6% m/m) and meat (-1.3% m/m). At the same time, prices for fruits jumped 2.2% m/m and vegetables rose 0.8% m/m, Concorde Capital reports.

Prices for housing and utilities slid 2.0% (vs. a 1.7% m/m rise in January) due to a plunge in natural gas prices by 12.9% m/m. In addition, prices for clothing and footwear decreased 4.3% m/m (after a 5.6% m/m drop in January). The decline was offset by growing prices for alcohol and tobacco (0.8% m/m). In addition, prices for health care climbed 0.5% m/m.

“The seasonal price decline for eggs and meat outweighed the seasonal increase in prices for foods and vegetables, resulting in dropping prices for food overall. The reduced volatility in prices for fruits and vegetables is a positive development that might indicate a more balanced supply and demand for these items at the market,” Evgeniya Akhtyrko of Concorde Capital said in a note.

“A plunge in natural gas prices for households also contributed greatly to February’s deflation. The continuing decline in prices for clothing and footwear is likely related to the recent drop in demand for outerwear caused by the recent abnormally warm weather,” Akhtyrko added. “Given February’s results, we are adjusting our forecast of consumer inflation to 3.3% YTD in 2020 (vs. 4.1% YTD in 2019).”