Inflation declined further in the first quarter of 2023, albeit marginally. However, it remained elevated and is projected to stay above the target band of 6— 8 percent over the next eight quarters (the forecast horizon).
In the first quarter of 2023, inflation averaged 9.6 percent compared to 9.8 percent in the fourth quarter of 2022. Dissipation of base effects in a broad range of items in the consumer basket3 and sustained reduction in the prices of oils and fats, due to lower costs of imported inputs, were the key drivers. Notable items in the consumer basket in which base effects dissipated were road passenger transport, fish, fuels bread, and cereals, as well as rent. Accounting for the reduction in prices of oils and fats was the decline in international soybean prices.
In April 2023, inflation rose to 10.2 percent from 9.9 percent in March. This was mostly driven by strong regional demand for maize grain and maize meal and the lagged pass-through from the depreciation of the Kwacha against the US dollar.