Inflation falls to over one-year low in July

Latest reading: Inflation came in at 19.5% in July, down from June’s 19.7%, marking the 12th-straight deceleration and the weakest rate since November 2023. Price pressures for food, hospitality, health and clothing declined. Recent decisions by the Central Bank have had played a crucial role in bringing down inflation: Its policy rate is among the highest in sub-Saharan Africa, and its recent intervention in FX markets has helped stabilize the domestic currency. Meanwhile, the trend pointed down, with annual average inflation falling to 25.0% in July from June’s 25.9% Lastly, consumer prices increased 1.47% over the previous month in July, accelerating from June's 1.21% increase and marking the highest reading since February.

Outlook: High interest rates and lower food prices are expected to push average inflation in 2025 below its 2024 level. Nonetheless, upside risks arise from the government’s strained finances, with major debt repayments due in H2 2025. This could prompt a sharper-than-expected depreciation of the currency plus an accelerated phase-out of the diesel subsidy, which would in turn fan price pressures.

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