Mauritius: December inflation eases on food, drinks

13 January 2010, Reuters
URL: http://af.reuters.com/article/investingNews/idAFJOE60704120100108?sp=true

Port Louis:   A strong currency and competition among Mauritius's retailers in December saw food and drinks lead a marginal decline in the Consumer Price Index (CPI) on the Indian Ocean island last month.  Consumer prices in Mauritius fell by less than 0.1 percent in December on the previous month while the annual average inflation rate slowed to 2.5 percent from 2.9 percent in November, official data showed on Friday.

"Lower prices were influenced by the appreciation of the rupee," Chandran Jankee, associate finance professor at the University of Mauritius, told Reuters.  "Tougher competition among traders also encouraged the business sector to cut prices in promotional campaigns during the festive season," he added.

Month-on-month the prices of food and non-alcoholic beverages fell 0.6 percent and alcohol and tobacco costs fell 0.5 percent. Clothing and footwear costs increased by 1.4 percent.  Overall, the CPI edged down to 117.2 in December from 117.3 a month earlier. Year-on-year inflation came out at 1.5 percent according to Thomson Reuters calculations.

December's headline rate, which is not seasonally adjusted, was slightly below the 2.6 percent forecast by Finance Minister Ramakrishna Sithanen in his 2010 budget speech in November.

The Indian Ocean island's annual inflation rate has trended steadily downwards since peaking at 9.9 percent in November 2008 off the back of record high oil prices and surging food costs.  However, the central bank has warned that future oil and food prices and the delayed implementation of stimulus exit strategies globally could pose upside risks to inflation further down the line.

Last month the bank's Monetary Policy Committee held its benchmark lending rate steady at 5.75 percent for the third consecutive quarter, noting that for now inflationary pressures continued to subside.

Consumer prices in the import-dependent economy are expected to trend upwards in mid-2010 as economies worldwide rebound and commodity prices pick up, according to the Bank of Mauritius.

At 0800 GMT the Mauritius rupee traded at 30.10 to the dollar against a high of 27.90 in mid December.  The central bank late last month began offering spot-to-three month forward swap transactions to counter a lack of liquidity in the foreign exchange market.