The current inflationary trend should reduce the cost of living

The National Institute of Statistics of Rwanda (NISR) early in the week released its monthly price index statement, reporting a 2.37 percent decline in the general inflation. Annual general inflation fell to 17.08 percent in March from 19.45 percent in the previous month. This is an improved trend compared with last year. During the year 2008, Rwanda experienced high inflationary pressures and annual inflation accelerated from 6.6 percent in 2007 to 22.3 percent in December 2008. The central bank attributed the skyrocketing inflation to imported inflation, which increased by 22.3 percent in 2008 against four percent in 2007. With consumer levels increasing by only 0.7 percent, between September and December last year, there was a growing feeling among the consuming public that inflation would decline. Being one of the inherent features of the economy, inflation has negative consequences, especially when it is going up faster than people’s incomes. The major terrible thing about it comes when the economy is run by consumers spending (when people have to buy to make the economy grow). If people don’t buy, then businesses don’t make profits, some thing that has massive consequences on the economy. François Kanimba, the Governor of the National Bank Rwanda (BNR) attribute the fall in the annual general inflation to stable fuel prices on the local market, which have helped to bring down essential commodity prices. The governor also attributed the positive trend to food harvest and low import prices which rose by 15.59 percent. Local goods increased by 17.77 percent. Food and non-alcoholic beverages, health, furnishing, household equipment, housing, water, electricity, gas and other fuels prices all increased but at a decreasing rate. Rising inflation means decline in the value of money while a declining trend signals an increase in the real value of money. The current trend in Rwanda should consistently be able to reduce the cost of living and also strengthen the case for savings. However, this will workout easily when prices of local goods start falling faster than prices of imported goods. High inflation is also feared by investors because it wears away the value of their investments. That is why investors include measures of expected inflation expected inflation when calculating their expected return on investment. The current trend should also be able to increase investor returns. Contact: gahamanyi1@gmail.com