Prices appear to be under control with Mauritius annual average inflation standing unchanged at 3.5 percent in December from the previous month, according to Statistics Mauritius data released on Thursday. The then prevailing inflation rate of 3.7% was used by the government as the basis for wage compensation, with wage increases announced in October 2013.
On a monthly basis, December 2013 saw the Consumer Price Index (CPI) increasing by 0.3 points to stand at 105.3 points. Factors contributing to this increase were cigarettes, vehicles, doctors’ fee, other products and services, an increase of 0.1 points each. A 0.1 points dip in the price of rum and other spirits helped in countering the price rise in the other commodities.
Against this, in November 2013, the CPI had increased by 1.1 points due to the price of the cigarettes and alcoholic drinks which had been hiked up following the increase in excise duty on these products, announced under Budget 2014.
However, even as average annual inflation held steady, the year-on-year rate of inflation – measured by change in the CPI for December 2013 compared to December 2012 – rose to 4.0 percent from 3.9 percent in November.
The significance of the year-on-year inflation rate is that this is the rate that is used by the Bank of Mauritius to determine monetary policy.
In its Inflation Report of October 2013, the Bank of Mauritius forecast that, till December 2013, year on year inflation would lie in the range of 4.5-4.9%, equivalent to a headline inflation (or ‘annual average’ inflation) forecast of 3.7-3.8%.
However, by June 2014, the central bank expects year-on-year inflation to escalate to a range of 4.9-5.5%, equivalent to a headline annual inflation forecast of 4.2-4.5%, in case Budget 2014 has the same impact as budget announcements of the prior two years.
Even more significantly, the report made a telling comment on containing wages, stating that, in the medium term, ‘wage developments in excess of both inflation and productivity growth’ pose the greatest risk to price stability.
Factors contributing to this increase were cigarettes and vehicles, among others, countered by a dip in the price of rum and other spirits. (Image: Rum and Reviews)
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