The July headline inflation numbers were released on Friday and as was widely anticipated, it declined by 0.14% to 11.08%. It is noteworthy that food inflation dropped by 0.17% to 13.39%. The food basket has been mostly responsible for pushing inflation in the last year. Therefore, any movement in food inflation is likely to have more than a corresponding impact on the general basket.
It is in this context that recent pronouncements of an intention to prohibit forex access for food imports could trigger a reversal in the inflation trend in the near term. This potential increase in inflation will be compounded by factors such as the minimum wage implementation which is already a subject of controversy.
In this publication, the FDC Think-Tank analyzes the inflation data for July and its impact on the economic policy environment.
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