Zimbabwe’s annual inflation cools off by 41.04 bps in February

0
373
  • Came in at 321.59% from 362.63% in January
  • MoM inflation came in at 3.45% down from 5.43% in January
  • RBZ targets an annual outturn of 10% and a monthly outturn average of 3%

Zimbabwe’s annual inflation for the month of February came in at 321.59% further cooling off as RBZ sets a bullish 10% year end target. Inflation has been on a downward trajectory since September, thanks to the foreign currency interbank market which has resulted in a relatively stable exchange rate.

Month on month inflation came in at 3.45% retrekking southwards after rising in January. food price pressure and the realignment of utilities in line with the market based exchange rate, resulted in an upward prices revision across a number of services.

In the 2021 Monetary Policy Statement announced last week the RBZ said it is targeting an annual inflation outturn of 10% by year end and an average month on month inflation rate of 3% in the current year. The bank said the targets will be underpinned by strict control of reserve money and an expected increase in agricultural production, consequent to the above-normal rainfall received in the country.

In recent years Zimbabwe’s currency instability and consequently hyperinflation has been as a result of excessive growth in money supply as the Central Bank issued currency recklessly to fund the government’s unbudgeted expenditure.

In the first half of 2020, the aggregate growth of reserve money in the country was 284% however, due to stern measures introduced by the monetary policy committee from June onwards to tame the growth levels such as the monetary targeting framework targeting a quarterly reserve money growth of 25%, by the time the year ended the growth was 115% which is equally a deadly territory but somewhat indicative of progress.

The Central Bank in its latest monetary policy for 2021 has committed to continue with a conservative monetary targeting framework, aiming to reduce quarterly reserve money growth target from 25% in 2020 to 22.5% per quarter in 2021, complementary to the targeted inflation of 10% by December 2021 and economic growth of 7.4%.

Meanwhile, the inflation target is also threatened by the fall of the Zimbabwean dollar which has lost a cumulative 2.4% since the beginning of the year after falling by ZW$0.14 cents at the last auction held on the 23rd of February 2021.

However, Equity Axis analyst Zvikomborero Sibanda believes that “if the Bank commits itself to these set targets and they are buttressed by a fiscal smart treasury as well as the realization of a bumper harvest together with a sharp recovery in commodity prices, inflation will continue to subside for the most part of the year.”

Equity Axis News

LEAVE A REPLY

Please enter your comment!
Please enter your name here