Food Prices and Inflation in Tanzania

We develop an empirical representation of inflation in Tanzania for the decade from 2001, estimating ‘multiple-determinant’ single-equation models for headline inflation and its major components (food, energy and core inflation). Our results suggest that while supply-side factors, including yield variability and international price arbitrage, play a major role in determining domestic food and fuel inflation (which together account for almost 60 percent of the total CPI basket), demand-side factors amenable to policy intervention by the monetary authorities anchor core inflation.