Thursday, June 13, 2024

Inflation hits lowest 1.2% in August

The inflation rate, which measures the pace of price rises, was 1.2 percent over the 12 months to August 2023, down from 1.5 percent in July, the Botswana government data collecting agency, Statistics Botswana (SB) has said.

The SB data published on Friday shows that the national Consumer Price Index (CPI) was 129.7 in August 2023, registering a slight increase of 0.1 percent from the July index.

“The main contributors to the annual inflation rate in August 2023 were the following groups; Transport (-2.3 percentage points), Food & Non-Alcoholic Beverages (1.2 percentage points) and Miscellaneous Goods & Services (0.7 of a percentage point),” reads part of the SB summary of the August 2023 inflationary movements.

Stripping out administered prices, the Trimmed Mean Core inflation rate was 5.5 percent in August, a decrease of 0.4 of a percentage point from the July 2023 rate of 5.9 percent.

While the SB Friday data reflects a drop in headline inflation, the figure is likely to trend upward from September following a hike of fuel prices by the Botswana Energy Regulatory Authority (BERA). On Tuesday, BERA hiked fuel prices citing supply side factors due to a voluntary output cuts by Saudi Arabia. Saudi Arabia, a major global player in oil export, is expected to extend a cut in supply of oil until the end of 2023, a move that could see inflation in fuel importing countries such as Botswana going up.

As a result of high oil prices in 2022, Botswana’s inflation rate reached double digit growth, hurting households and businesses due to reduced purchasing power. To tame the spiraling inflation and bring it down to its tolerable range of 3-6 percent, the country’s central bank then effected sharp interest rate increases, rising the monetary policy rate three times last year, from 1.14 percent rate to the current 2.65 percent. At last meeting of the Monetary Policy Committee, the bank governor, who is also the chairperson of the MPC, Moses Pelaelo said that inflation fell on account of the downward adjustment in domestic fuel prices effected on June 21, 2023.

Following the slash in fuel prices, domestic inflation decreased significantly from 4.6 percent in June to 1.5 percent in July, breaching the lower bound of the central bank’s medium-term objective range of 3 – 6 percent.  Meanwhile the bank has projected that domestic inflation will revert to within its tolerable range from the first quarter of 2024.

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