Abstract:
Consumer price index (CPI) is a socioeconomic statistic that tracks changes
over time in the average price of consumer goods and services such as household
purchases of fuel, transportation, food and so on that consumers buy, use, or pay
for. The purchasing power of everyone is impacted by rising costs, especially if
salaries stay the same. Our ability to purchase more things with our TZS reduces
when the CPI increases more quickly than earnings, which has an impact on our
cost of living. The aim of this study is to use the CPI monthly data from IMF
website for the period from Jan 2010 to Dec 2022 to develop a forecasting model
by using Holt Winter’s approach. Holt Winter's model based on four equations
and popularly known as Triple exponential smoothing is commonly used in
forecasting data with trends and seasonality. Holt Winter’s model is composed
of four equations relating to level, trend, seasonal and forecast. The results
revealed that the Holt winter’s model with smoothing parameters, 0.9 for level,
0.12 for trend, and 0.03 for seasonal was the best model in forecasting Consumer
Price Index. The CPI for Tanzania is predicted for the next eighteen months and
it has been observed that the trend of CPI is likely to increase in the next eighteen
months.
