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Reserve Bank of Malawi maintains inflation target

Wilson Banda

The Reserve Bank of Malawi (RBM) has maintained the five percent mid-term inflation target, saying there is no need to press the panic button.

Central bank Governor, Wilson Banda, said this recently on the sidelines of the Institute of Chartered Accountants conference in Mangochi.

Last week, RBM’s Monitory Policy Committee also revised downwards average headline inflation for 2020 to 8.6 percent from the earlier projection of 9.8 percent.

Headline inflation decelerated by 0.5 percentage points to 7.1 percent in September 2020, the lowest record since December 2017, representing 23 percent drop when compared to 9.2 percent headline inflation recorded in September 2019.

Banda said while headline inflation may not close the year at five percent, the central bank maintains the target for medium term.

“The medium term projection of inflation is five percent. We are coming 11 percent earlier on in the year and 12 percent late last year. We are now heading towards that five percent.

“Definitely, everything being equal, if we have resumption of normal economic activity; yes, we should see inflation coming to five percent,” Banda said.

He said average inflation for 2021 was projected to be lower than 10 percent.

In a recent interview, Dean of Commerce at The Polytechnic, Betchani Tcheleni, said the ease in inflation alone was however, not an indication of economic stability.

In December last year, inflation closed on 11.5 percent with an annual average of 9.4 percent— about 0.2 percentage points above RBM’s projected 9.2 percent.

Food inflation rate during the year rose from 10.7 percent in January 2019 to 19.3 percent as at December 2019 while non-food inflation declined from 7.1 percent in January 2019 to 4.5 percent in December 2019.

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