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Tuesday, 4 June 2013

Inflation Watch (May 2013)

Inflation rate climbed up in May. It stands at 7.0%, up from 6.5% in April. The inflation measure is a year on year measure. So this means are 7% higher in May 2013 compared May 2012.

The increase in fuel prices has undoubtedly affected the rise. GRZ removed fuel subsidies on May 1, increasing the cost of gasoline and diesel by more than a fifth. The Bank of Zambia responded by increasing its benchmark interest rate for the first time in seven months. The policy rate was raised by 25 basis points to 9.5 percent.

The BoZ statement notes : “The committee anticipates upward risks to inflation during the month of June 2013, mainly arising from the recent increase in the pump price of fuel, coupled with the lagged effects of the recent exchange-rate depreciation". It goes without saying that the Government is unlikely meet its projected inflation level of 6% for 2013 due to further expected increases in food and electricity prices. The continuous depreciation of the Kwacha will continue to increase inflationary pressures on imported goods. The Kwacha has declined by 3% this year.

Copyright © Zambian Economist 2013

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