Zimbabwe’s consumer prices fell 15% in July on currency rally

By Bloomberg News

• Central bank sees low to negative inflation in second half
• Drop is good news for ruling party ahead of election

Zimbabwean consumers prices fell in July after the nation’s currency strengthened.

Consumer prices dropped 15.3%, compared with 75% last month, and rose 101% from a year earlier after a 176% increase in June, the Zimbabwe National Statistics Agency said Monday in an online briefing.

The central bank, which is targeting monthly inflation of 1% to 3% this year, expected it to be “very low to negative territory” in the second half of the year, Governor John Mangudya said by phone on July 21.

The downward trajectory may provide room for the bank’s monetary policy committee to cut the world’s highest interest rate after lifting it to 150% from 140% on June 6. It’s also likely to be used as rallying points by incumbent President Emmerson Mnangagwa, who will vie for a second-term against about 10 other candidates in Aug. 23 elections.

‘Laughing All the Way to Supermarkets’

Nick Mangwana, the president’s information secretary, said in a recent Twitter post that as prices fall people are “laughing all the way to supermarkets.”

Inflation has eased on the back of a 53% rebound in the Zimbabwean dollar against the greenback this month, driven by new rules that require corporate taxes to be settled in the local unit and the loosening of foreign-exchange controls, making it the world’s best performer.

Read More: World’s Worst Currency Flips to Best to Upset Zimbabwe’s Economy

In June, the central bank stopped short of free-floating the local currency in the battle to end volatility and close the gap between the official and black-market rate that’s distorted pricing. The currency plunged almost 100% against the dollar in the first half of this year before this month’s rally.

The liberalization of the foreign-exchange market by the central bank has helped stabilize the exchange rate, according to Mangudya.

“Inflation in Zimbabwe is a movement of the exchange rate in the parallel market, which has a pass through effect onto prices,” he said. “With the appreciation of the currency, prices have been going down.”