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Inflation down to 10.2% in July

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Malawi’s headline inflation softened by 1.1 percentage points from 11.3 percent in June to 10.3 percent in July as food prices continued to fall, the National Statistical Office (NSO) said on Tuesday.

This year’s July inflation is 12.2 percentage points better than the 23.5 percent recorded in July 2016.

The July 2017 inflation is 0.3 percentage points shy of the single digit inflation the Reserve Bank of Malawi (RBM) wants to achieve by December 2017.

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According to NSO, urban and rural rates stand at 9.3 percent and 11.0 percent respectively.

On the overall, food inflation stands at 7.4 percent from 9.3 percent in June 2017 while non-food inflation stands at 12.7 percent from 13.2 percent in June 2017.

Malawi’s inflation has been on a downward spiral in the first half of 2017 driven by improved food availability coupled by the tight monetary policy implemented by RBM as well as a stable exchange rate.

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RBM Governor, Dalitso Kabambe, earlier predicted that inflation could hit 8.5 percent in December, 2017.

Kabambe said headline inflation will continue to decline in 2017, on account of better harvest and stability of both exchange rate and international oil prices.

He further said the rapidly declining inflation creates room for gradual easing of monetary policy.

“The precise path of monetary easing will remain data-dependent while being conditional on inflation being on track to reach its target of 12.3 percent or below by December

“The bank will continue supporting the disinflation process by keeping the policy rate above the headline inflation. In parallel, the bank will continue improving its communication with market participants and the general public to convey its commitment to price stability and enhance the transparency and credibility of its monetary policy to better anchor inflation expectation,” said Kabambe.

On July 5, 2017, the central bank slashed the country’s policy rate by 400 basis points from 22 percent to 18 percent, a development which has seen commercial banks reducing their base lending rates from an average of 33 percent to around 27 percent.

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