Reported inflation figures for Zimbabwe returned to the trend of falling inflation in February after a slightly worrying uptick had taken centre stage in January. Year on year inflation was reported at 321.59%, lower than the previous months’ 362.63% and also lower than the forecast 340%. Month on Month inflation also supported the trend dropping to 3.45% from January’s 5.43%. Analysts had expected month on month inflation to come in at 4.7%. This in the month that the Reserve Bank of Zimbabwe announced a monetary policy with contractionary implications.
Things are largely going to plan for the monetary authorities, so far at least. After peaking at 837.53% 8 months its been on a downward trend all but one month. The January inflation figures are starting to look like the exception to the rule. Tighter control on reserve money growth has brought inflation down while stabilising exchange rates in both the official and the parallel markets which have stuck around 1:80 and 1:100 respectively for the last 6 months.
Similarly, on a month on month basis, inflation returned below 5% as it has done for all but one (January 2021) of the last 6 months. According to CPI month on month inflation was 3.45% in February 2020, a far cry from the peak of 40%in early 2020. The dip can be partially explained by the reduction in food inflation as we are in the harvest months of the year. This combined with the reduced comes people are living with due to lockdown, which will relax soon leads to a reduction in food prices.
The RBZ has set its inflation target for the year-end at 10% year on year, which is a very ambitious target. Inflation for the year currently stands at 9.068% and as many analysts suggest the RBZ target is too ambitious. The monetary policy announced recently has many contractionary measures to buttress this plan but with a largely informal economy being under lockdown and having its borders closed a return to activity will likely have a push effect on both inflation and exchange rates.
Zimbabweans are certainly in a better place than they were 6 to 12 months ago from a price increase perspective. That said prices are still increasing. Though the increases are all around or below 5% month on month the questions still beg whether income levels are keeping up with this. Highly unlikely for those who still have incomes after experiences of covid-19 and lockdown.