The dream of single-digit year on year inflation is over. First, it was mentioned by the Reserve Bank Governor Dr John Mangudya that escalation in the parallel market exchange rate has pushed prices upward and means the target of 25-35% was no longer achievable. Now the other shoe has dropped as inflation data for October confirms the reversal of the inflation trend we had become used to. Year on year inflation increased for the second month in a row to 54.49% while month on month inflation hit 6.4%, its highest level since August 2020.
A picture is worth a thousand words and the graph above shows the reversal of the trend we had grown accustomed to in 2020 of declining inflation. The decline in inflation was not just academic, ordinary people on the street could confirm that prices were certainly not rising as fast as they used to. Now we see the reversal of the trend. With the Finance Minister expecting inflation to end the year between 35 and 53%, an upward revision from the ambitious target of below 10% the reversal confirms the need to revise the target. Inflation rose by 2.94% in October. What’s truly menacing is the increase in the rate of increase after a jump of only 1.31% in September. The observant amongst you would’ve noticed that at 54% inflation is already above the year-end target and increasing rates of increase do not bode well for the target.
The month on month picture, the one we were encouraged to look at early in Finance Minister Mthuli Ncube’s tenure also paints a grim picture with month on month inflation hitting a 13 month high at 6.4%. You’d need to go back to the time just before the temporary stability was experienced on the parallel market, August 2020 to see a higher month on the monthly inflation rate. The graph above depicts a steep incline over the last few months and the should be worrying. The trend over the last 12 months has now been drawn into growth territory and all signs suggest inflation is headed back up.
These mark difficult times for Zimbabweans. A year ago an inflation rate of 55% would’ve been a dream and welcomed with wide-open arms. But seeing it as we have now, after buying dreams that were sold of lower inflation rates it is hard to rejoice at the sight of. History tells us that once inflation starts that upward trend, it rarely stops. And that’s why the faster rate of increase in October is a bad omen, it increases faster and faster too. The parallel market rate’s contribution to this is noted. However, the parallel market is itself a symptom of conditions rather than a cause of them.
