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Firm sees further rise in inflation

Investment management and advisory firm, Alliance Capital Limited, has predicted continued rise in headline inflation in coming months owing to maize price volatility on the market.

In its monthly economic report for July, the firm says inflationary pressures from non-food components have remained relatively mute on the back of stable fuel prices and that coupled with the recent appreciation in the exchange rate are expected to remain contained.

However, it says food inflation has recently come under new threats mainly from maize prices as they have risen on the local market following speculative demand pressures.

“Since the food component accounts for 45 percent of total Consumer Price Index (CPI) this could lead into further upticks in headline inflation,” the report reads.

Headline inflation for July 2019 was seen at 9.3 percent from 9.0 percent recorded in June.

Published figures from National Statistical Office show that food inflation stood at 14.2 percent in July 2019 from 13.7 in June.

Non-food inflation was seen at 5.5 percent in July 2019, from 5.4 percent during the preceding month.

The price of maize, Malawi’s staple food, has been on an upward spiral in the past three months, currently trading between K8,500 and K10,000 per 50 kilogramme bag in some parts of the country.

Meanwhile, Alliance Capital Limited has predicted that the kwacha will continue to appreciate against other currencies in the short term.

It notes that the kwacha continues to recoup the losses it incurred in the last two months and is expected to stabilise against the dollar to levels experienced prior to the depreciation as speculative demand pressures seem to have greatly abated.

“Despite volatility of the pound and rand, in the short term we expect the kwacha to trade with an appreciating bias against these two currencies on account of economic tensions currently rocking South Africa and the UK individually,” the report reads.

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