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A Look At Inflation Rate For July

There are two comparisons of inflation used. These are: Annual Average Inflation: This compares the average CPI over the past twelve months with the average CPI over the previous twelve
17 Sep 2016 08:04
A Look At Inflation Rate For July

There are two comparisons of inflation used. These are:

  1. Annual Average Inflation: This compares the average CPI over the past twelve months with the average CPI over the previous twelve months; and
  2. Year-on-year Inflation: This compares the CPI in the current month with the CPI in the comparable month of the previous year.

The year-on-year inflation rate for the month of July rose for the fourth consecutive month to 5.5 per cent.

The Graph shows the year-on-year and the annual average inflation rates from July 2015 to 2016.

It depicts that from the month of April, inflation rates increased dramatically for the year-on-year measure.

This was due to the shortages in market related items following the natural disasters earlier this year.

As a result, this increased cost of goods, higher excise duty on alcoholic beverages and tobacco and the increase in fuel prices in the month of July.

Our central bank is comfortable with an inflation rate of around 3.0 per cent because it is consistent with price stability and is a key objective of monetary policy.

They review the outlook for inflation and if it rises sharply and deviate substantially from its acceptable level then they will look for control measures such as:

 Monetary measures, raising interest rates in order to dampen demand for goods and services and reduce any pressure on prices or tighten liquidity conditions

 Fiscal policy, is the budgetary policy of government relating to taxes, public expenses, public borrowing and deficit financing to stimulate or slow down the economy

 Direct measure, rationing of goods and freezing of prices and wages by government or increase voluntary savings of people by giving them various incentives.

 

Overall Picture

Inflation seems to have spiked from the months of April and May from a meek 1% to a year high of 5.50%.

Key drivers remain around; Recreation & Culture 1.6%; Transport and associated gas & liquid fuels 0.90% and the usual Alcohol, Tobacco and Narcotics by 0.80%.

Thus, reflecting the increases in economic activity of mobility via tourism & business or better road infrastructure.

Thus, burning the associated fuels for transport not to mention the number of cars and households.

This filters into recreation, business and tourism consumption of Alcohol, Tobacco and Narcotics.

Notable are offshore student holidays and business conferences. Conclusively inflation affects our local dollars purchasing power the most.

This is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at the HFC Bank, Peter Fuata

FeedBack: rachnal@fijisun.com.fj

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