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Zimbabwe inflation breach danger zone

by Staff reporter
18 Sep 2018 at 06:28hrs | Views
Zimbabwe's annual inflation rate rose 0,54 percent to 4,83 percent in the month of August, latest figures from the Zimbabwe National Statistics Agency (ZimStats) show.

This was a marginal upturn from the July 2018 figure of 4,29 percent. Month-on-month inflation also decreased by 0,59 percentage points to 0,39 percent in line with analysts' forecast that the rate is likely to slow around September and October 2018.

"The month-on-month inflation rate in August 2018 was 0,39 percent shedding 0,59 percentage points on the July 2018 rate of 0,98 percent," said ZimStats.

Because of the sharp price increase seen from September last year, but tapered towards year end, the gap measured against 2017's final quarter is likely to decline to less disturbing year-on-year numbers by October, economist John Robertson said. Robertson said July inflation was high because of falling prices during the same period last year.

From May 2017 through to July of the same year, the inflation rate was falling from 0,7 percent in May to 0,1 percent in July and this has resulted in a widened gap this year as rates trends north. The decline in the month-on-month inflation rate will likely reduce concerns about assumptions of a runaway inflationary rate.

"The year-on-year inflation rate (annual percentage change) for the month of August 2018 as measured by the all items Consumer Price Index (CPI) stood at 4,83 percent, gaining 0,54 percentage points on the July 2018 rate of 4,29 percent.

"This means that prices as measured by the all items CPI increased by an average of 4,83 percent between August 2017 and August 2018," said ZimStats in its latest monthly report.

The year-on-year food and non-alcoholic beverages inflation prone to transitory shocks stood at 7,52 percent while the non-food inflation rate was 3,58 percent. Some observers have attributed the quickening inflation to the continuance of the parallel currency market.

Zimbabwe currently uses a basket of currencies dominated by the United States dollar, as well as financial instruments — the bond notes, which are guaranteed by an international financial organisation.

Although the Reserve Bank of Zimbabwe (RBZ) has pegged and maintained the US dollar-bond note official rate at 1:1, cash shortages have resulted in a thriving black market for physical currency, both bond notes and United States dollar notes. And it was largely assumed that the high demand for US dollars by both companies and individuals continues to push up the exchange rate.

The RBZ has estimated that Zimbabwe's inflation can rise to 4,6 percent without necessarily hurting economic growth. The Consumer Price Index for the month ending August 2018 stood at 101,04 compared to 100,65 in July 2018 and 96,39 in August 2017.

Source - the herald