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Rainfall, monetary policies halt inflation

DAR ES SALAAM, TANZANIA - The tight monetary policies being adopted by East African Community (EAC) Central Banks, and the onset of the rains has given hope that the twin occurrences will halt the fast growing inflation rates in the region.
  The inflation rates which were feared could keep climbing until at least early next year, exacerbated mainly by food shortages and rising energy prices, as well as shillings depreciation, could be held back by these measures.
  The Chief Executive Officer (CEO) of the Tanzania Securities (TSL), Moremi Marwa said: "The recent heavy rainfall is good because, it contributes to the increase in food supply and less costly energy from hydrogenated power." Much of Tanzania electricity is hydro generated, but with the drying up of dams, it failed to produce electricity and thus plunged the country in darkness.
  The other fight against inflation stems from the current pursuit by the EAC central banks' tight monetary policies they are adopting in unison.  In Tanzania the food basket and energy are the biggest contributors to the rise or fall of inflation among the weights used to calculate the consumer price index (CPI).  
  "Prices of food and non-alcoholic beverages, which carry about 50 % weighting in the CPI, and in utility prices (housing, water, electricity, gas, and other fuels), with about 10 % weighting are the main contributors into the CPI," he added.
  The monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth.
  According to National Bureau of Statistics (NBC) food prices, which carry a 47.8 % weighting in the CPI, increased by 22.5 % from a year earlier compared to an increase of 18.6 % in October 2011.
Tanzania central bank Governor Prof. Benno Ndulu said that Bank of Tanzania intervention to prevent the Tanzanian shilling weakening was not necessary because an increase in Tanzania's inflation rate was due mainly to rising food and oil prices.
  "The cause of the rise is not actually monetary-based. It's been essentially exogenous because of the increase in food prices and the increase in oil prices, which are both outside of the control of monetary policy," said Prof. Ndulu.
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