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OpenCZI Doubts RBZ's Ability To Meet 2025 Inflation Targets
The Confederation of Zimbabwe Industries (CZI) has expressed doubts about the central bank’s ability to meet its inflation targets for 2025, following price increases in January.
CZI, in its January inflation and currency developments report for January, noted that while the 2025 National Budget and Monetary Policy Statement (MPS) aimed to keep monthly inflation below 3 per cent through strict fiscal and monetary policies, the high inflation recorded in January 2025 could jeopardize the central bank’s targets. CZI said:
The elevated ZiG month-on-month inflation rate poses a significant challenge to achieving a low annual ZiG inflation rate by May 2025, when the annual inflation figure will be reported.
Zimbabwe’s month-on-month inflation for January 2025 surged to approximately 10.5%, marking a 6.8 percentage point increase from the 3.7% recorded in December 2024. Noted the CZI:
A month-on-month inflation rate of over 10 per cent is significantly high and generally disruptive in the economy as it erodes purchasing power and causes uncertainties, resulting in a loss of confidence in the local currency.
CZI warned that the high inflation rate for January jeopardized the achievement of the policy target to keep monthly inflation below 5%.
The US dollar-denominated monthly inflation also began the year at a higher rate of approximately 11.5% in January 2025, marking the highest level in the past four years. CZI said:
In Zimbabwe, US dollar inflation is normally a response to ZiG inflation, as retailers adjust their prices in line with ZiG prices to avoid being accused by the RBZ’s Financial Intelligence Unit (FIU) for using the parallel market rates…
A double-digit US dollar inflation under a highly dollarised environment is a cause for concern, as prices are generally expected to be stable in US dollar terms.
Presenting the 2025 MPS, Reserve Bank of Zimbabwe Governor John Mushayavanhu said that inflation is expected to maintain a downward trajectory, with month-on-month inflation projected to average below 3% throughout 2025. He added:
Given the base effects caused by the spike in monthly inflation in October 2024, annual inflation is expected to be elevated from April 2025 to September 2025 before significantly moderating to the end of the year 20-30 percent.
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