(Bloomberg) -- Zimbabwe, long a poster child for runaway inflation, has raised eyebrows by declaring a dramatic slowdown in price pressures.
The National Statistics Agency on Thursday announced the annual rate of inflation fell to 18.4% in September, compared with 77.2% a month before, after it revised the methodology used to calculate the number.
That didn’t stop the central bank holding interest rates at a world-record high of 150% later in the day. But it did win credit for creativity.
“It’s a way to manage the situation,” said Prosper Chitambara, a senior research economist at the Labour and Economic Development Research Institute of Zimbabwe. He added that it would help avoid a “slip further into the vicious cycle of self-fulfilling expectations.”
The statistics agency said the new inflation measure now takes into account the widespread use of US dollars in the economy, which account for 80% of transactions over the local dollar. Greenbacks are used to pay for everything from food to fuel and medicines.
Zimbabwe, whose Zim$100 billion note was crowned as the highest ever denomination by Guinness World Records when it was issued in 2008, abandoned the domestic currency a year later.
Hyperinflation had rendered it worthless.
It got so bad that then-US Treasury Secretary Timothy Geithner once boasted to Congress he carried one in his wallet as a warning against lax monetary policy.
Zimbabwean President Emmerson Mnangagwa brought the local currency back in 2019 but the government has battled to stabilize its value against the dollar.
That year, the Finance Ministry ordered a blackout of inflation data for six months to allow the agency to collect comparable data after the Zimbabwean dollar was relaunched. Inflation persisted, touching 837% in June 2020.
In March, the statistics agency said it had adopted a blended consumer price index, also to better reflect the increasing use of the greenback. The move resulted in an immediate fall in the inflation rate to 92%, the first double digit reading since July last year.
The Reserve Bank of Zimbabwe’s monetary policy committee on Thursday expressed “satisfaction” at the inflation trajectory for the rest of the year, which in June stood at 175.8%. It cut its annual inflation outlook from the earlier year-end forecast of between 60% and 70% to “below 20%.”
©2023 Bloomberg L.P.