The Reserve Bank of Zimbabwe (RBZ) says current global developments emanating from the disturbances in Ukraine have presented renewed threats to efforts meant to stabilize inflation in the country.
Central Banks world over are under-presser to raise interest rates to cut off rising prices caused by the effects of the COVID-19 pandemic disruptions which are now being worsened by the diplomatic tiff between Russia and the western countries over Ukraine.
The RBZ has been keeping money supply in the economy under close watch since the resurgence of inflation late last year as part of interventions to stabilize the local currency.
According to Zimstat, month-on-month inflation for February reached 7 percent- the highest since August 2020’s 8.4 percent.
There are growing fears that the upward movement in prices could persist as tension between Russia and Ukraine escalate. The two countries are major producers of key commodities such as gas and oil, fertilizer, cooking crude oil, aluminum and steel.
In its latest update of the Monetary Policy Committee meeting, the Bank said the Committee raised concern over increase in broad money (M3) and its implications on parallel market activities and inflation.
“The Committee noted that the spike in month-on-month inflation from 5.3% in January 2022 to 7% in February 2022 mainly reflected increase in global and administrative prices,” the Bank said.
“The Committee’s deliberations focused on ensuring that the exchange rate remained well anchored and that current short term exogenous inflation pressures from the global economy and administrative prices would not be transmitted into domestic inflation.”
As part of the interventions proposed was to maintain the Bank policy rate at 60 percent and the Medium Term Bank Accommodation (MBA) Facility interest rate at 40 percent.
The committee also advised the Bank to maintain reserve money growth targets at 7.5 percent for the first and second quarters of 2022.
However, these measures can only affect internal price push factors with limited influence on external pressures.
Already global oil price have shot up. Crude oil rose by $7.00, or 7.1%, to settle at $104.97 a barrel, their highest close since August 2014 prompting members of the International Energy Agency (IEA) to plot releasing 60 million barrels of crude from their reserves to try to suppress the sharp increase in prices that pushed major benchmarks past $100 a barrel.
Locally, ZERA set cap prices of both diesel and petrol at US$ 1.51 from US$1, 44 for diesel and US$1, 41 for petrol.
The increase in fuel prices as economic enabler is expected to have a multiplier effect on price hikes across the entire economy.
Authorities face a high likelihood of revising their initial annual inflation forecast for 2022 of 30 percent in light of recent global developments.
