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We See Headline Rate at 15.9% in October 2017 – FBNQuest

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Wednesday,  October 18, 2017 9:27AM / FBNQuest Research

The latest inflation report from the NBS shows headline inflation y/y at 16.0% in September: this was the eighth successive slowdown, albeit by just 3bps on this occasion. Our expectation, shared with wire service polls of analysts, was an uptick to 16.3% y/y. Core inflation slowed from 12.3% in August to 12.1% y/y while food price inflation was 7bps higher at 20.3% y/y. 

Policymakers will note that the m/m rate for all three measures declined in September for the third month in succession: by 19bps for the headline measure, by 13bps for core inflation and by 27bps for food prices. They can therefore conclude that there is a movement towards general price stability. 

The CBN’s reference range for the headline rate, for what it is worth, is a y/y target of between 6.0% and 9.0%. We do not see the attainment of this range before 2019.

For imported food prices September brought both m/m and y/y increases. Given the stability of the fx rate in the various windows in recent months, the first probably reflected rises in the dollar price of individual food commodities.   

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As for the stance of the monetary policy committee (MPC), the communique after its meeting in late September noted several reasons for stubbornly high food price inflation including a weak harvest. The MPC also indicated that it did not anticipate significant gains on GDP growth (higher) and inflation (lower) much before Q1 2018. 

We see the headline rate at 15.9% in October.  

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