Zimbabwe’s blended consumer price index increased 175.8% in June from 86.5% in May, says the Zimbabwe National Statistics Agency, whilst prices rose 74.5% during the month, compared to 15.7% in May.
The country adopted the consumer price index as its inflation benchmark back in February, as it is a better reflection of the economic reality due to tracking prices in US and Zimbabwean Dollars.
The US Dollar makes up 75% of all transactions in Zimbabwe’s economy and is a preferred store of value over the volatile local Dollar, Zawya reports.
Within a report ahead of the release, the Confederation of Zimbabwe Industries said it is unlikely the monthly inflation target of between 1% and 3% would be reached in 2023.
“The ability to meet blended inflation targets is now under serious threat,” the association stated.
Inflation has been fuelled by a steep decline in the Zimbabwean Dollar. Since May the central bank has loosened controls on the forex market, but stopped short of free-floating the local Dollar in a bid to end volatility and narrow the gap between the official and black market rate.
Over the past two months, the Zimbabwean Dollar has depreciated 85% on the official market.
The monetary policy committee at the central bank increased the interest rate - the highest in the world – to 150% from 140% earlier this month, three weeks before a meeting to curb inflation, yet has since ruled out additional increases.
“We’ve already hiked rates and there is a limit to hiking rates,” said Governor John Mangudya last week.
The recent moves by the Reserve Bank of Zimbabwe are part of a series of measures undertaken by authorities to stabilise the local Dollar. These include President Emmerson Mnangagwa’s prohibition on the bank borrowing foreign currency without the Treasury’s prior approval.
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