Inflation Continues to Pick Up Speed

16 May 2011

April’s annual inflation rate continued to edge its way upward to the year-end peak of 7,4 per cent forecast by Capricorn Investment Holdings (CIH), climbing one percentage point from March to end at 4,8 per cent.

“We expect that inflation will continue to gradually increase during the remainder of the year, reaching a high of 7,4 per cent by the end of the year. Consequently, the average annual inflation rate for the year as a whole is projected at 5,5 per cent,” John Steytler, group economist and industry advisor at CIH, said on Friday.

He said while the factors driving inflation are mainly cost-push and exogenous in nature, it is expected that the Bank of Namibia (BoN)will gradually start to increase its policy rate toward the first quarter in a bid to contain inflationary pressures arising from possible second round effects and to contain inflation expectations.

“In this regard, it is expected that the repo rate will increase to 6,5 per cent by the end of the year with possible additional increases in 2012,” Steytler said.

Mainly responsible for the acceleration in consumer prices was food price inflation that shot up on an annual basis to 4,4 per cent during April from 2,6 per cent during the preceding month, he said.

Within the food basket, the annual rate of bread and cereal inflation jumped to 7,9 per cent in April from 1,0 per cent one month earlier.

During the same period vegetable prices moved from 1,9 per cent to 7,3 per cent. On the other hand prices of meat products and vegetables moderated on an annual basis.

Transport prices, the other key drive of inflation also moderately edged up to 4,8 per cent on an annual basis during the month of April from 4,3 per cent during the previous month.

“Although crude oil prices softened somewhat since the beginning of May, we are yet to full the full impact of previous fuel hikes, hence transport inflation is set to continue its upward trajectory during the remainder of the year,” Steytler said.

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