We estimate that annual average inflation rose in 2010 owing to higher oil and non-oil commodity prices and a fall in agricultural output, which increased the cost of wheat imports. Average inflation fell to 3.1% year on year in the first quarter of 2011. The explanation for this surprisingly low figure is that upward pressure on prices from supply-chain bottlenecks (arising from work stoppages) and from higher global commodity prices has been offset by reduced domestic demand. We forecast that oil prices will average US$108.5/barrel in 2011, revised up slightly from US$101/b previously. We forecast that inflation in 2011 will average 5.3%, reflecting these higher oil and commodity prices. A relatively tight monetary policy will ensure that inflation remains manageable during the forecast period, averaging 4.2%.