Headline inflation increased marginally by 0.06% to 12.26% in March. Most analysts had anticipated a steeper rise due to the negative economic impact of Covid-19 and the exchange rate pass through effect on commodity prices. The projections do not take into consideration the usual time lag between policy, palliatives and impact. The slight uptick in the general price level was largely due to the base year effects of the border closure and the implementation of the new VAT rate of 7.5%.
Rising inflation expectations likely to force the MPC to tinker with the CRR
Inflationary pressures are likely to intensify in the coming months as the planting season commences and the impact of the Covid-19 outbreak and the exchange pass through becomes more potent. This could prompt the MPC to become more accommodative in it stance, even though inflation will become more aggressive in the next few months. The soft stance of the MPC will be as part of the stimulant and palliatives to save livelihoods and lives in 2020.
In the publication, the FDC Think Tank shares its thoughts on the impact of March’s inflation numbers on the economy and likely policy decisions.
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