Headline inflation slightly up

.RBM outlines inflation’s underlying assumptions

Latest National Statistical Office (NSO) figures show Malawi’s inflation rate for January rose by 0.5 percentage points to 25.9 %.

According to the NSO, the year-on-year inflation rate for the month stands at 25.9 %, an increase from the25.4 % in December while food and non-food inflation rates are at 30.5% and 20.4 % respectively.

The rate which had been rising for 12 consecutive months until early in the last quarter of 2022 has notably slowed down in the past two months in response to declining global inflation.

In an earlier interview with Capital FM, Catholic University based economist Hopkins Kawayepredicted the current spiral, which he attributed to high prices induced by the lean period.

Meanwhile

Monetary authorities are maintaining the fundamental assumptions for 2023 as they project a slowdown in the annual rate of price inflation.

In its first monetary policy report for the year, the Reserve Bank of Malawi (RBM) insists it remains committed to the medium-term inflation objective of 5% with a symmetric band of 2 percentage points.

In the report, the RBM expresses its determination to see the annual inflation ease from 21 % in 2022 to 18.2 % this year.

According to the Central Bank, domestically-produced food prices are expected to remain high this lean period, while pressures on imported inflation are projected to be subdued.

It also expects electricity and water tariffs to remain unchanged during the first quarter of 2023 with strong money supply growth.

“Headline inflation is projected to slow down to 18.2 % in 2023 from 21.0 % in 2022, in anticipation of subdued imported inflationary pressures on account of declining fuel and non-fuel global commodities prices.

“Apart from easing supply bottlenecks necessitated by the switch to non-Russia suppliers as well as the UN-initiated Black Sea grain deal, the decrease in global commodity prices is expected to be sustained by the weak demand following the prevailing tight financial and monetary conditions, particularly in advanced economies,” reads the report in part.

However, the report says the risks from domestic factors remain heightened due to lagged effects of fiscal slippages and exchange rate depreciation, in addition to elevated prices of domestically-produced food commodities on account of the delayed effects of high costs of inputs.

Commenting on the subject; local economic analyst, Fredrick Changaya, is describing the inflation trajectory as inspiring to consumers and the business community.

“We hope from the fiscal side things continue to happen in such a way that inflation keeps decelerating and easing for the betterment of the economy because the more inflation hits us it affects the two other variables which are exchange rate and interest rates,” He said.

During its recent meeting, RBM’s Monetary Policy Committee settled to maintain the policy rate at 18 % despite acknowledging some need to still tighten the policy.

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