Zimbabwe to retain old inflation gauge for rate decisions

Zimbabwe’s monetary authority won’t switch to using a new inflation gauge to determine interest rates, despite the statistics agency having adopted it as its main price reference, an official said.

Following the publication of a notice by Finance Minister Mthuli Ncube on Friday, the statistics office began referencing the blended consumer price index, which tracks prices in both US and Zimbabwean dollars, rather than the benchmark headline rate that assesses costs in local-currency terms. The change was spurred by an increase in US dollar-based transactions, estimated at more than 75% of the total, as citizens turn to greenbacks to pay for everything from food, fuel, and school fees.

“The Zimbabwean dollar interest rate will remain,” Persistence Gwanyanya, a member of the central bank’s monetary policy committee, said in an interview on Tuesday. The local-currency inflation rates will be available to policymakers and continue to “guide” them in setting the benchmark interest rate, he said.

The southern African nation last month cut its benchmark interest rate to 150%, the world’s highest, from 200% on expectations that a downward trend in inflation will continue.

The annual blended inflation rate in February fell to double digits for the first time since July and monthly price growth was -1.6%, the first negative reading since September 2020, according to data from the Zimbabwe National Statistics Agency. The local-currency gauge stood at 229.8% in January and prices rose 1.1% in the month. The February data has yet to be published.

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