The Consumer Price Index report released yesterday shows that headline inflation increased to a 22-month high of 12.2% Y-o-Y in February 2020, from 12.1% in the previous month.
A report by Afrinvest Research says the marginal rise in inflation suggests that the recent VAT increase is yet to be fully captured.
Similarly, core inflation rose to 9.4% from 9.3% and food inflation was higher at 14.9% from 14.85%. The broad-based rise in inflation was despite a general moderation on M-o-M basis for the first time since August 2019.
Afrinvest says the M-o-M moderation in consumer prices in February reflects the thinning-out effect of festive season purchases and land border closure. However, we believe this would be short-lived once consumer prices fully reflect the recent VAT increase.
‘In addition, as a fallout from the effects of the COVID-19 pandemic, we expect exchange rate pressures and supply chain disruptions with trade partners to impact domestic consumer prices in the coming months.’