Tunisian central bank sees inflation below 7 percent after rate rise

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Tunisia’s central bank chief said he expects inflation to fall below 7 percent following Tuesday’s interest rate rise but the government also needs to do more to curb prices.

“After our decision to raise the interest rate we expect the annual inflation to fall to less than 7 percent, precisely to 6.8 or 6.9 percent,” central bank Governor Marouane Abbassi told reporters on Wednesday. Inflation stood at 7.1 percent in January.

The bank raised its key interest rate to 7.75 percent on Tuesday, from 6.75 percent, to curb inflation, the third such hike in the past 12 months. It last raised the rate by 100 basis points in May.

“Raising interest rates is very important but not enough to curb inflation,” he said. “It should be accompanied by other measures by the government including fighting cross-smuggling and monopolies in local trade.”

Tunisia’s inflation rate has come down from 7.5 percent in December and had reached 7.8 percent last June, the highest since 1990.

The dinar has slumped as a worsening trade deficit has eroded Tunisia’s foreign currency reserves, which now cover only about 85 days’ worth of imports.

The International Monetary Fund called last October for further monetary tightening by Tunisia to tackle rising prices.

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