ZimStat’s monthly inflation update left us with a few things to think after both inflation measures showed a marginal decline. Year on year inflation was down by 0.13% to 60.61%. Meanwhile, month on month inflation was down 0.42% to 5.34%. Such marginal moves may indicate some sort of stability and a look at the trends over the months may support this thinking.

The graph shows us that the decline was indeed very small. If we start to look at the bars for the last 7 months we can see that inflation has somewhat settled. Finance Minister Professor Mthuli Ncube’s revised target for inflation of around 55% at year-end can be considered achieved with the task of now maintaining the balance going forward. Inflationary pressures on the economy persist, particularly from the parallel market exchange rate. The parallel market is still the reference rate for the pricing of goods and services in the nation. December 2021 saw a sharp increase in the parallel market exchange rate of between 20 and 30% depending on sources.

Meanwhile, the month on month picture also supports the idea of finding stability. We have noted many times in the past that month on month inflation has very erratic patterns. Seeing the bars for the last few months cluster tightly around the same level suggests again that we are approaching some sort of stability. After the meeting between the Reserve bank of Zimbabwe and the business to map a way forward on pricing and inflation. The resolutions of the meeting did not change much in policy or behaviour direction but were reiterations of what we have already seen.

With the auction back up and running the pressure on the parallel market exchange may be somewhat alleviated. This could keep things at bay but perhaps not for long. The government, the largest employer in Zimbabwe is currently negotiating a demand from the civil service for a hefty wage increase. History tells us that these events lead to inflationary pressure on the economy.