The Monetary Policy Committee (CPMO) of the Bank of Mozambique, the country’s central bank, forecasts a “slight acceleration” of inflation in the economy by the end of the year, but still to below 6%, according to a report released today.
“The short-term outlook points to a slight acceleration in inflation. These perspectives reflect the end of the cool season, the increase in tariffs at the Moamba toll and the increase in fuel and food prices in South Africa,” the ‘Economic Situation and Inflation Perspectives’ report reads.
The report however warns that “the prevailing risks” to these perspectives are “uncertainties” regarding “the adjustment of fuel prices at domestic level” and “the magnitude of the effects and impact of the ‘El Niño’ phenomenon”.
“Economic agents have revised their inflation outlook for the end of the year downwards. In September 2023, the expectations of economic agents indicate that, in December 2023, annual inflation could be 5.88%, after 6.39% revealed in the previous survey [in August],” the CPMO report relates.
Annual inflation in Mozambique fell to 4.9% in August, after 5.7% in July, a fall attributed by the central bank, “mainly by the fall in food prices, favoured by the extension of the cool season, in a context of stability of the metical”.
These perspectives led the CPMO to decide on September 22 to maintain the monetary policy interest rate at 17.25%. “This decision is supported by the worsening of risks and uncertainties associated with inflation projections, despite the prospects of remaining in single digits in the medium term. The prospects for single-digit inflation remain in the medium term,” it said.
It adds that “the risks and uncertainties underlying inflation projections have worsened” in recent weeks, and that internally “pressure on public spending and uncertainties regarding the evolution and effects of extreme climate events are expected to prevail”.
“In the external environment, uncertainties regarding the magnitude of the impact of the prolongation and escalation of the conflict between Russia and Ukraine stand out, as well as the recent trend towards increasing fuel prices. The materialisation of these risks could contribute to an acceleration of inflation, deviating it from the expected trajectory,” the report also warns.