Inflation under control – Reserve Bank of Malawi

Post was last updated: September 6, 2018

By William Kumwembe:

The Reserve Bank of Malawi (RBM) has said there is no need to press the panic button on inflation, maintaining its forecast of an average single digit by the end of this year.

Malawi’s headline inflation took a u-turn in July and rose by 0.4 percentage points from 8.6 percent to 9 percent.

Commentators fear this would have an effect on the inflation outlook.

However, speaking on the sidelines of the 2018 Institute of Internal Auditors Annual conference on Friday, RBM Governor, Dalitso Kabambe, said the bank expects inflation to average within the single digit band this year.

“We are upbeat that, for this year, average inflation would remain in single digit. We are also upbeat that we are moving forward to achieving our medium-term objective of a five percent inflation rate by first quarter of 2021. That is the direction we would be taking on the monetary side as well as the fiscal side,” Kabambe said.

Explaining the July inflation rate, Kabambe said the rise was in line with earlier projections.

He said the central bank was doing all it could to contain the pressure by having a right monetary policy stance and ensuring that liquidity is mopped out in the economy, and that the economy remains very tightly managed.

“We kept on highlighting the clouds that are hovering around us. And we were saying that the movement of global fuel price is one of the risks.

“We also see risks in terms of tariff adjustments for utilities and we also see maize prices correcting themselves from very low last year to normal prices this year,” Kabambe said.

In its July inflation update, the National Statistical Office (NSO) said headline inflation rose to 9 percent from 8.6 percent recorded in June due to a rise in both food and non-food inflation.

NSO said food inflation inched up from 9.1 percent in June to 9.5 percent in July while non-food inflation surged from 8.2 percent in June to 8.7 percent in July.

Malawians have in recent weeks struggled with surging maize prices which have averaged K7,000 per 50 kilogramme bag and transport costs buoyed by last month’s fuel price hike.

In addition, energy prices also jumped, following a seven percent electricity price hike by the Electricity Supply Corporation of Malawi.

As if that is not enough, the citizenry is waiting for another significant shock as the Malawi Energy Regulatory Authority board meets this month to nod a 53 percent electricity tariff hike, which analysts fear would drive inflation further.

In addition, Capital Hill has approved an average eight percent water tariff hike for all water boards.

Dean of Social Sciences at the Catholic University, Gilbert Kachamba, recently warned that inflation would go up in the months to come as prices of basic commodities, including maize, go up.

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