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Inflation down to 11.3 percent in June

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Malawi’s headline inflation decelerated by 100 basis points in June 2017 to 11.3 percent from 12.3 percent in May, thanks to continued improvements in food availability, the National Statistical Office has said.

This year’s June inflation is 11.3 percentage points better than the 22.6 percent recorded in June 2017 but is 0.6 percentage points shy of the 10.7 percent predicted by the Reserve Bank of Malawi in its monetary policy statement released last month.

According to NSO urban and rural inflation stood at 9.9 percent and 12.5 percent, respectively.

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Food inflation continued to soften in June and was recorded at 9.3 percent from 11.2 percent in May while non-food inflation fell to 13.2 percent in June from 13.5 percent in May 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.

RBM Governor, Dalitso Kabambe, predicted in the Monetary Policy Statement that inflation could hit 8.5 percent in December, 2017.

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Kabambe observed that the 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 2017.

“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.

However, analysts have argued that the commercial banks could do more by slashing the base lending rates further to jumpstart private sector borrowing which could help fast-track the country’s economic recovery process.

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