Sunday, May 29, 2022

Inflation rises in line with expectations

The transport group index pushed the national year-on-year inflation rate higher in September, ending the months of softening Consumer Price Index (CPI) figures.

Central Statistics Offices (CSO) said inflation rose to 7.0 percent y/y in September from 6.7 percent y/y in August as a host of basket items, including clothing and footwear, transport, furnishing and equipment had an impact on the figures.

Food and non-alcoholic beverages remained steady. Analysts said the numbers are in line with expectations.

“Given that the September inflation number is in line with our forecast number, we still expect inflation to end the year at 8 percent, mainly driven by the higher food and transport inflation,” Carol-Jean Harward, Investment Analyst at Investec, said.

All the other indices saw increases of less than 1.0 percent on a month on month basis. Core inflation, which strips out volatile price elements such as tobacco and fuel, ticked up by 0.2 percent to 7.4 percent between August and September.

“We forecast inflation to come in at 7.6 percent in October as the second-round effects of the increase in VAT and electricity charges start to kick in,” Howard said saying the continued weakness of the Pula against its major trading partners is also likely to fuel inflation in the coming months.

Garry Guma, an analyst with Motswedi Securities, said he expected inflation to close the year at levels above 6 percent y/y, but stabilising around the 3 ÔÇô 6 percent medium-term objective range from 2011.

“However, uncertainty with respect to oil prices as well as possible increases in administered prices and government levies might exert inflationary pressures on the economy,” Guma said.

Guma added that uncertainties with respect to oil prices as well as possible increases in administered prices and government levies might exert inflationary pressureson the economy.

On an annual basis, prices have increased the most for transport ÔÇô by a staggering 11.4 percent, which comprises about 18.98 percent of household expenses. Food prices on the other hand are up only 3.3 percent compared to last September.

Despite the surge for September, Investec and Motswedi expect Bank of Botswana (BoB) to leave Bank Rate steady and be accommodative.

“Against this background, we expect the Bank of Botswana Monetary Policy Committee to leave interest rates unchanged at its meeting expected towards the end of this month,” said Guma.

“We still expect the Monetary Policy Committee to maintain their accommodative policy stance, not only as they remain concerned about the uncertainty in developed markets but also as they would want to nurture the economic recovery currently underway,” added Howard.

The CSO data showed the cities and towns’ inflation rate recorded an increase of 0.3 of a percentage point, from 7.7 percent in August to 8.0 percent in September.

The urban villages’ September inflation rate was 6.4 percent, up by 0.5 of a percentage point from the August rate of 5.9 percent, while the rural villages’ inflation rate was at 5.6 percent, the same rate as in August.

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