Gold: Headline inflation cools down to 4.3%

MBABANE – Inflationary pressures are beginning to wane as the headline inflation in February showed a decrease of 0.2 percentage points from the 4.5 per cent observed in January 2024 to 4.3 per cent.

The latest consumer price index (CPI) report issued by the Central Statistical Office indicated that in February 2024, the inflation rate for goods was 4.8 per cent and for services, it stood at 3.5 per cent.

Headline inflation refers to the total inflation in an economy.

INFLATION

The headline inflation figure includes inflation in a basket of goods that includes commodities like food and energy.

Year-on-year highlights from the report indicated that food and non-alcoholic beverages decreased from 17.0 per cent in February 2023 to 4.4 per cent in February 2024.

This was due to fish and seafood; oils and fats (which both recorded negative growths); and bread and cereals, which recorded a slower growth.

Health decreased from 22.3 per cent in February 2023 to 5.8 per cent in February 2024.

This was due to lower price increases observed in medical services.

Meanwhile, transport rates decreased from 5.0 per cent in February 2023 to 1.1 per cent in February 2024. This lower rate is due to negative growth rates observed in airfares; and fuels and lubricants in this category.

Month-on-month highlights (February 2024 compared with January 2024) indicated that restaurants and hotels, decreased from 12.2 per cent in January 2024 to 0 per cent in February 2024 where zero growth rates were observed in accommodation services.

Miscellaneous goods and services decreased from 4.0 per cent in January 2024, to 0.4 per cent in February 2024. This was due to slower growth rates observed in other services.

Meanwhile, health increased from 1.3 per cent in January 2024, to 3.5 per cent in February 2024, where growth rates were observed in medical services.

BORROWING

The Financial Times reported that higher borrowing costs have helped ease the fast pace of price growth that swept the world over the past three years during the pandemic and war in Ukraine.

The cost of borrowing or interest rate in Eswatini has remained unchanged at 7.50 per cent since late last year and it is expected to remain unchanged for the first half of the year and then drop in the second half.

The New York Financial Times reported last week that central banks around the world are expected to lower borrowing costs as global inflation eases from the multi-decade highs reached in many countries over the past two years.

Some institutions, particularly in emerging markets, have already started cutting rates, but many more are forecast to follow this year, including the US Federal Reserve, the European Central Bank and the Bank of England.

EXPECTATIONS

The next monetary policy consultative committee (MPCC) meeting is scheduled to take place on March 29 where the Governor of the Central Bank of Eswatini, Dr Phil Mnisi, will be expected to announce if the interest rate will change or remain unchanged much to the expectations of economists.

In the last monetary policy statement, the governor said the CBE was monitoring the international and domestic developments that influenced the movements of inflation and would act appropriately in line with its mission to foster price and financial stability that is conducive to the development of Eswatini.