RBZ: Headline And Blended Inflation Expected To Decline

The Reserve Bank of Zimbabwe (RBZ) has projected that both headline and blended inflation in the country will decline this year.

RBZ governor, Dr. John Mangudya, in his Monetary  Policy Statement (MPS) presented Thursday said the new monetary policy measures which are being implemented will result in a decline in inflation. Reads in part the MPS:

Due to strong monetary policy measures being implemented by the Bank, especially keeping reserve money growth under check and the improved efficiency in the allocation of foreign currency through the foreign exchange auction system, both overall and blended inflation have been on a downward trajectory since the second half of 2020.

2.11 The headline CPI month-on-month inflation rate ended the year at below 5% as desired by monetary policy, resulting in annual inflation closing the year 2020 at 348.6%, slightly above the forecasted 300%. The CPI month-
on-month inflation for January 2021, however, slightly increased to 5.4% from 4.2% in December 2020, which saw year-on-year inflation rising moderately to 362.6% in January 2021, from 348.6% in December 2020.

The increase in inflation in January 2021 largely reflected the adjustments in administrative levies and charges that include electricity, municipal charges, rates and health charges, some of which are traditionally effected at the beginning of the year. The January 2021 inflation outturn was also influenced by the increase in international commodity prices for maize, wheat, fuel, crude soya oil, among others.

2.12 The blended inflation, however, remained low at an average of 2 percent since August 2020. The blended year-on-year inflation stood at 188.9 percent in December 2020, better than the 250 percent projected in the August 2020 Monetary Policy Statement. The blended annual inflation, however, marginally increased to 191.5 percent in January 2021, as a result of increases in prices as explained above. Overall, both headline and blended inflation are expected to progressively decline in 2021.

The blended CPI is used because of the dual pricing system we have in the economy where the country has USD and ZWL$ prices while the general CPI is based on the ZWL$ pricing system.


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