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Stats Show Marginal Rise In September Inflation

In the latest release by the Fiji Bureau of Statistics, changes were noted in the Consumer Price Index for the month of September. The average annual rate of inflation for
06 Oct 2018 10:00
Stats Show Marginal Rise In September Inflation
Shoran Devi

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

The average annual rate of inflation for the twelve months to September 2018 stands at 3.5 per cent.

This is while comparing the average consumer price index (CPI) for the 12 months from October 2017 – September 2018; with the average for the 12 months from October 2016 – September 2017.

The month-on-month inflation rate (compared with September 2017) stands at 4.6 per cent.

The all items CPI for the month of September registered an increase of 0.5 per cent over August 2018 [121.6] and stands at 122.2.

Expenditure class which recorded price changes between August 2018 and September 2018 are as follows:

  • Food And Non-Alcoholic Beverages recorded a one per cent rise.
  • Higher prices were recorded for breadand cereals, meat, fish andsea food, milk, cheese and eggs, fruits, vegetables, food products not elsewhere classified and non-alcoholic beverages such as coffee, tea and cocoa.
  • Alcoholic Beverages, tobacco and Narcotics were up by 0.4 per cent.
  • Higher prices were recorded for spirits, beer and yaqona.
  • Health increased by 0.1 per cent.
  • Higher prices were recorded for pharmaceutical products and other medical products.

No price changes were recorded in the communication, education and restaurants and hotels division while other expenditure classes recorded some price changes but the changes balanced out.

The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households.

CPI data

CPI data is very closely followed by all the financial market participants to help analyse price movements, market trends, and determining economic policy moves.

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.

The main use of CPI release for most of the market participants is its role as a major determinant of interest rates for central banks.

Modern central banks increasingly regard the inflation rate as the main target of policies, and due to the importance of the central bank rate to economic trends, the CPI serves as an early warning indicator of changes in central bank policy directions.

Inflation determinants

However, inflation only may not be the sole determinant for any policy moves.

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

In reality, policy formulators refer to a ranging set of economic indicators to decide on any such policy directions.

Domestically, 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 of Fiji’s conduct of monetary policy.

Uncertainty

This is represented by maintaining average inflation rates at around three per cent.

In that regard the RBF states that excluding kava, alcoholic beverages and tobacco, the current inflation rate is below three per cent.

If prices are prevented from going up (inflation) or down (deflation) too rapidly, this will protect the purchasing power of our currency.

Strongly rising (inflation) or falling (deflation) prices leads to uncertainty about the future, and this changes the way in which people behave.

For example, in anticipation of increasing prices, people will start demanding for higher paying jobs.

This will in turn lead to companies factoring in this high labour costs in their product pricing.

This then has a spiral effect on the economy and as such makes it rather difficult to make sound economic decisions.

Hence, price stability is a necessary precondition for a healthy economy.

Feedback: maraia.vula@fijisun.com.fj



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