Annual inflation drops further to 3.1 percent

MASERU — Lesotho’s annual inflation dropped to 3.1 percent last month, a 0.2 percentage point drop from the previous month’s rate of 3.3 percent, according to the latest figures released by the Bureau of Statistics this week.

The inflation rate has been hovering below five percent since the beginning of the year.

The bureau said goods that recorded high increases were utilities such as housing, water, electricity, gas and other fuels which increased by 4.5 percent year-on-year.

Other groups that contributed to the higher annual increase were food and non-alcoholic beverages at 3.7 percent while miscellaneous goods and services increased by 3.4 percent.

Household equipment, furniture and routine maintenance increased by 2.4 percent while clothing and footwear increased by 2.2 percent on a year-on-year basis.

The lower inflation rate should leave consumers with more disposable income during this festive season.

Economists say there has also been a general decline in the prices of grains which has helped keep food prices down this year.

The inflation rate plays a key role in a country’s monetary policy as it is used by the central bank and commercial banks to adjust interest rates.

Metropolitan Lesotho managing director Nkau Matete said the low inflation rate was due to stability in the international oil markets.

Matete said he expected the inflation rate to stabilise around three percent in the coming months.

“I still believe inflation will go down. However it will stabilise at around three percent in the coming months . . . it will remain in the lower ranges for some time,” Matete said.

He said these are good times to borrow and to finance larger assets such as housing and large purchases such as vehicles as the interest rates were low.

“Low inflation indicates stable prices which will be good for consumers as they will have more disposable income,” he said.

However, Matete said recent developments on the international scene such as the Ireland financial crisis could create panic in the market which could affect the current stability.

“What is still worrying though are the current problems faced by Ireland as it has to be bailed out. That might cause panic in the markets,” Matete said.

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