Inflation Dynamics in the West African Economic and Monetary Union: WAEMU
Selected Issues Papers, June 19, 2023
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Bibliographic details
- Authors: Cecilia Melo Fernandes
- Published: June 19, 2023
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798400245886.018
Key findings on recent inflation developments
- Food is the main driver of inflation in all inflation spikes in the past two decades.
- The contribution from energy prices is also increasing.
- Inflation contagion effects are still limited to a few sectors.
- The share of professionals that believe that inflation will continue above the target within the one-year horizon is at high levels compared to 2021.
Projections and model results
- Projections are based on two models.
- Results suggest that inflation is expected to converge to its target range within 24 months given:
- the reduction of exogenous shocks weighing-in on food and energy prices,
- the exhaustion of base effects,
- a reduction in supply and demand imbalances.
Policy implications and recommended stance
- The chapter evaluates appropriate monetary policy responses to the recent inflationary pressures.
- Further monetary policy tighten would be necessary unless downside risks to forecasts for baseline inflation and external buffers improve.
Risks and uncertainty
- Numerous external and internal factors affect inflation prospects and should be carefully monitored.
- There is pronounced uncertainty surrounding geopolitical and economic developments that could alter the baseline projection.
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- Sipea2023038