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Marginal Rise In July Inflation

A comprehensive measure used for estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy is called Consumer Price Index. Consumer Price
18 Aug 2018 11:00
Marginal Rise In July Inflation
Shoran Devi

A comprehensive measure used for estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy is called Consumer Price Index.

Consumer Price Index is the most well-known indicator of inflation and is perhaps not an uncommon subject when it comes to economic fundamentals.

If the CPI is rising, the economy is going through a phase of infla­tion while the economic situation where the CPI value falls below zero is called deflation.

We feel the consequence of infla­tion every time we head to that cash out counter or receive that pay check.

Inflation is simply the increase in price of goods and services or the decline in purchasing power of our income.

When prices go up, the amount which can be bought with a fixed amount of money goes down; when prices fall, the amount which can be bought increases.

In the latest release by the Fiji Bureau of Statistics, changes were noted in the Consumer Price Index for the month of July.

The average annual rate of infla­tion for the 12 months to July 2018 (that is comparing the average CPI for the 12 months to July 2018 with the average for the 12 months to July 2017) stood at 3.1 per cent.

However, the month-on-month in­flation rate (compared with July 2017) stood at 4.7 per cent.

The All Items CPI for the month of July registered an increase of 0.4 percent over June 2018 (121.0) and closed at 121.5. It is important to note that the CPI is not a measure of price levels or average prices, it is a measure of price change.

CPI alone cannot be used as a measure of the total change in liv­ing costs.

The true rate of inflation cannot be observed but we can use the CPI (and similar price indexes) to help us approximate the inflation rate.

In practice many adjustments are made to CPI on account of season­ality, changes in composition of the basket and the likes.

Different versions of CPI are also calculated to cater to real life needs.

Our central bank aims to main­tain price stability and so to avoid situations of severe deflation/infla­tion as one of the twin objectives of Reserve Bank’s conduct of mon­etary policy.

However, if inflation is driven by global rather than domestic devel­opments, policy changes may not help.

In that regard, it is worthy to note that the 2018 year-end inflation forecast has been revised upwards to 5.0 per cent, from the 3.0 per cent projected earlier.

This is mainly owing to inflation­ary pressure expected from the rise in crude oil prices combined with the impact of duty increase on al­cohol and tobacco announced in the FY2018-2019 National Budget.

Feedback: maraia.vula@fijisun.com.fj


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