The Reserve Bank of Malawi (RBM) has maintained the inflation forecast of a single digit this year and five percent in the first quarter (January to March) of 2021.
In an interview on Friday in Mangochi, RBM Governor Dalitso Kabambe said the central bank remains upbeat that this year and moving forward, the inflation rate forecast and target will be achieved as this is the direction that RBM has taken from the monetary and fiscal perspective.
The governor gave the assurance in reaction to recent inflation figures published by National Statistical Office (NSO) which show that the country’s headline inflation rate for July 2018 increased by 0.6 percentage points to nine percent from 8.6 percent the previous month largely pushed by inceased food prices.
During the review period, food inflation rate rose by one percent to 9.5 percent while non-food inflation rate marginally rose by 0.4 percent to 8.7 percent.
But Kabambe said the upward inflation was already projected, saying the central bank has in place controls to manage the situation.
He said: “For two consecutive times, we have maintained the policy rate at 16 percent and we have continued to highlight the clouds that we are seeing and are hovering around us.
“Notably, there were movements of global oil prices. Secondly, there were also risks in terms of water and electricity tariffs adjustments.
“Other than this, we also pointed out that prices of maize may be correcting themselves from very low prices last year to normal prices this year.”
Kabambe said from a monetary policy perspective, the central bank is doing all it can to have the right monetary policy stance in place and ensuring that liquidity in the economy is mopped up so that the economy remains tightly managed to manage the inflation, a monster that eats into people’s disposable income.
In an earlier interview, economic commentator Gilbert Kachamba projected that inflation rate will likely continue edging upwards as the country approaches the lean season in availablity of food, which constitutes 45.2 percent of the consumer price index (CPI), an aggregate basket of goods and services used to measure inflation.
He said: “We see inflation taking a different direction as we approach the growing season. We should expect it [inflation] to rise even further and soon we might hit double digit. This is likely to affect inflation through non-food channel.
“Ultimately, the cost of production is going to increase, thereby affecting prices of a wide-range of items in the consumer price basket which will lead to overall increase in price level and affect consumer’s disposable income.”