We’ve watched over the last 12 months as inflation in Zimbabwe started to accelerate. After peaking 24 months ago, inflation started a miraculous slowdown in Zimbabwe. Prices were not going down but rather the rate of inflation slowed from 837% to 50.24% in just 12 months. Just as soon as we’d started celebrating inflation started to accelerate again. And we noted within a few months the dark sign that inflation was increasing at a faster rate each month. August 2022 inflation data shows an increase to 285%. Positives can be drawn from the slowdown in the year-on-year inflation rate increase and a halving in the month-on-month inflation rate.

Year-on-year inflation

The picture is clear, the upward push of inflation is continuing. At 285% prices are increasing 5 times faster than they were just 12 months ago. This is Zimbabwe. We last saw a reduction in inflation 13 months ago when the rate was on its way down. We have discussed the reasons for inflation before. The readings have overwhelmingly provided higher rates each month than the last save two other times in the last 12 months. For August the increase was only 28.1% compared to 35.3%, 59.9% and 65.3% in May, June and July respectively. This is the silver lining to the dark cloud inflation continues to cast over the Zimbabwean economy.

Month on Month

The month-on-month inflation picture confirms the deceleration in the year-on-year inflation is not just an anomaly. Over the last few months, we have seen month-on-month inflation figures that look more like they belong in 2020 when inflation was at its worst. However, in August we have seen a cool down. Though 12.4% is certainly high it is a welcome relief from the 20s and 30s of the last 3 months.  It’s a bit early to be speaking about the targets that the RBZ governor set in the latest monetary policy statement so we will not draw such comparisons yet.

The measures are working!

The last Reserve Money update showed an increase in the money supply

With the parallel market rate bowing to pressure and coming down somewhat and now inflation slowing down could the measures be working? Well, you can’t argue with the results, the measures are working but the question is which measures are working. It will be interesting to see the next Reserve Money Update, which tells us how much money is in circulation in Zimbabwe and what kind of money it is. Thus far the RBZ has done well in managing the monetary situation though we know from experience things can unravel very quickly.