Thursday, November 16, 2017 /11:30AM /FBNQuest Research
The latest inflation report from the NBS shows headline inflation y/y at 15.9% in October. This was the ninth successive slowdown, albeit by just 7bps on this occasion. Our expectation, shared with wire service polls of analysts, was 15.9% y/y. Both core and food price inflation barely moved in the month, at 12.1% and 20.3% y/y respectively.
Policymakers will be encouraged by the fact that the m/m increase in the headline measure slowed for the fifth month in succession. The overall trends are positive yet the rate of the slowdown has been painful, at 283bps cumulatively since January y/y and 111bps since May m/m.
The CBN’s reference range for the headline rate has long been between 6.0% and 9.0% y/y. We do not see the attainment of this range before 2019. The range is not a binding target yet we doubt that the monetary policy committee, which meets next week, will cut its benchmark rate without a more substantial decline in inflation.
For imported food prices, October brought both m/m and y/y increases. Given the stability of the fx rate in the various windows in recent months and the much enhanced fx availability, the explanation probably lies in the dollar price of individual food commodities.
Inflation has remained stubbornly high throughout the now-ended recession because of supply factors affecting food prices, notably the poor infrastructure, insecurity in the north east and a pick-up in food exports.
We see the headline rate falling gently to 15.8% in November.
2. Headline Inflation Drops to 15.91% in October 2017, 0.07% Lower Than 15.98% September Rate
3. Rising Crude Oil Price Driving Short-Term Stability
4. Headline Inflation To Decline Again To 15.89% in October
5. Egyptian Government Looks to Make Its Third Drawings Under Its Extended Fund Facility
6. A Further Healthy Rise in Reserves