Zambia’s April annual inflation has signaled an infinitesimal ebb of 0.1% to 22.7% from previous months climb as reported by the Zambia Statistics Agency – ZASA in the capital. The consumer price index – CPI was supported by a 0.6% ease in food inflation to 27.2% offsetting a 0.5% climb in non food prices to 17.5% for the month of April. This nonetheless keeps inflation at a 61 – month high.
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The copper producers inflation has been cost push driven fueled by a weakening currency following mismatches in supply and demand. However, currency depreciation has persisted but at a slower pace in the month of March supporting the ebb reported in CPI.
Inflation however remains a thorny issue for Zambian money markets after sending the short end of the government security curve underwater 370-870 basis points which could signal potential bearish yield rate trajectory. Tenors below one year are still yielding below 22.7% making investments in those durations unattractive. With barely 3 – weeks to the second rate decision meeting of the year commencing 17-19 May, the infinitesimal ebb could suggest what the central bank monetary policy committee stance could be. Despite sovereign risk concerns eased by a recent Fitch upgrade to CCC, risk premiums remain fairly positive in the bond markets.
Other metrics closely knit with cost push inflation such as private sector pulse as measured by Markit Economics Purchasing Managers Index – PMI will be expected to ease and hover around the 50 benchmark for April from previous months 49.7.
The Kwacha Arbitrageur