Kiev - Officials at the National Bank of Ukraine (NBU) on Tuesday predicted the country's galloping inflation will soon slow down to a still-hefty 16 per cent annual rate, the Interfax news agency reported.

A revaluation of the national currency, the hryvna, and falling food costs as crops go to market saw inflation slow in May to 1.8 per cent for the month, well down from April's 3.2 per cent, said Oleskadner Savchenko, NBU vice chairman.

"We have put the brakes on inflation, we were criticized for changing the official exchange rate (of the hryvna)," Savchenko said. "We believe this result is primarily due to the National Bank."

Ukraine, hard hit by the worldwide jump in food and energy prices, in recent months has seen one of the highest inflation rates in the world. Prices during March alone jumped 3.8 per cent.

The NBU policy of currency market intervention to shore up the hryvna is not popular with Ukrainian industrial leaders and most Ukrainian consumers, with the stronger hryvna reducing Ukrainian industrial commodity competitiveness in international markets, and hiking credit rates inside the country.

Officials in Ukraine's eastern industrial heartland already have warned of economic stagnation if the policies of a strong hryvna and tight credit are allowed to continue.

Savchenko argued the NBU's policies nonetheless were the best strategy in a difficult economic situation, saying that inflation was the worst threat to Ukraine's economy.

Since 2000, Ukraine has seen some of the strongest economic growth in the world, regularly posting annual economic expansion at a 5 to 12 per cent annual rate.

The NBU has supported the growth by tying the hyrvna to the US dollar in a limited float, with the hryvna relatively undervalued. Since the beginning of 2008 the NBU has increased the value of the hryvna against the US currency by 6 per cent.

Inflation during 2007 was 16.6 per cent. Savchenko's prediction of 2008 inflation, a number essentially unchanged from 2007, is close to double a 9 per cent inflation rate planned by the government for the 2008 national budget. (dpa)