Inflation slows to 6.7 percent

MBONGENI MGUNI
Staff Writer | Thursday September 16, 2010 00:00

 

Government reduced retail pump prices for both petrol and diesel by 13 and 25thebe per litre respectively on August 9, while the price of illuminating paraffin was cut by 37thebe per litre. The Department of Energy Affairs said the reductions represented an effort to normalise prices following 'a heavy' increase in fuel prices in May.

The August inflation figure marks a return to the below seven percent inflation range seen in the first quarter of the year.

National year-on-year inflation opened 2010 on 6.1 percent holding in January and February before sliding further to six percent in March. Inflation then rose to 7.1 percent and 7.8 percent in April and May, before declining to 7.7 percent and seven percent in June and July.

August's inflation rate is thus the closest the rate has been to the Bank of Botswana's medium-term objective of between three and six percent since March.

Yesterday, the CSO said the Transport Index, which covers fuel prices, fell by 0.6 percent in August as a result of the reduction in fuel prices. Other indices making up the inflation rate rose marginally with Restaurants and Hotels recording the highest change of 0.6 percent.

'The Restaurants and Hotels group index recorded an increase of 0.6 percent from 122.9 in July to 167.5 in August,' the CSO said. 'The increase was a result of the constituent section indices of Restaurants, Cafes and the Like and Accommodation Services, which increased by 0.6 and 0.3 percent respectively.'

The Bank of Botswana (BoB) and other analysts have already predicted that the inflation rate will ease back into the medium-term objective in the first half of next year as inflationary triggers and high inflation expectations taper out of the system.

BoB has also moved to support the inflation objective through its Mid-Term Review of the Monetary Policy in which the central bank says it will continue with its neutral monetary policy stance. BoB's Monetary Policy Committee is not expected to make any adjustments to the bank rate in its last two meetings of the year, although it says it is on the lookout for inflationary triggers. Triggers include further increases in government levies and administered prices.