Monday, June 1, 2020

Consumer inflation in consecutive increase

BY BONNIE MODIAKGOTLA

Consumer prices increased slightly in June, picking up from the previous month upward movement, and threatening to breach the lower end of the 3 ÔÇô 6 objective range, data from Statistics Botswana shows.

Statistics Botswana’s consumer price index (CPI) for June reveals that inflation was recorded at 2.8 percent, a slight increase of 0.2 percent from the figure recorded in May. Core inflation, which excludes prices of volatile stuff, such as fuel and food, went up to 2 percent from May’s 1.9 percent.

The uptick in inflation was on the back of price increases in the furnishing, household and routine maintenance group index, as well as the alcoholic beverages and tobacco group, and the housing, water, electricity, gas and other fuels group index.

It has been a period of low inflation environment in Botswana, which extends as far as 2014, with the last three-year data revealing that inflation has been hovering around the 3 percent mark, which is the lower rung of Bank of Botswana’s objective range to contain inflation within 3 to 6 percent range.

Consumer prices averaged 3.4 percent in the first quarter of the year, higher than the 3 percent recorded in the same quarter last year, and inflation is projected to rise in the short term, revealed Bank of Botswana in its latest Monetary Policy Report.

The central bank says the slight increase in inflation was mostly accounted for by a faster increase in prices for the operation of personal transport and transport services. However, this did not come as a surprise as BoB had forecasted the same inflationary growth rate for the quarter.

On the other hand, core inflation ÔÇô which excludes volatile prices such as fuel and food ÔÇô averaged 2.7 percent in the first three months of the year, slightly lower than 2.9 percent averaged in the first quarter of 2018.

The central bank has since revised its February 2019 monetary policy committee (MPC)’s inflation forecast – rising it slightly following new information pertaining to the country’s economy. The central bank now expects inflation to be slightly higher in the short to medium term, but will remain within the bank’s 3 ÔÇô 6 percent objective range.

The rise in inflation in the short term mainly reflects upward adjustments of alcoholic beverages in the second quarter of 2019, following Kgalagadi Breweries Limited (KBL)’s price review of their entire beer portfolio, said BoB in the report.

Moreover, the central bank says after its February inflation assessment, food prices were later revised upwards in the entire forecast period. International food prices are projected to increase in the short to medium term due to rising shipping costs and adverse climatic shocks in the Southern African region.

In its last MPC meeting in June, the central bank maintained its two year record low bank rate at 5 percent, explaining that the prevailing monetary policy is consistent with inflation reverting to within the objective range. The central bank hawks say they give a full update on the bank’s outlook for the domestic economy and inflation after its MPC meeting end of August.

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