Inflation rate to slow down at 14.90% in January — FDC

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Analysts at Financial Derivates Company Limited (FDC) have predicted that inflation rate will plunge to 14.90 per cent in January 2018.

According to FDC report, “We forecast that year-on-year headline inflation will plunge to 14.9per cent in January 2018. This is a 0.47per cent decline from 15.37 per cent in December 2017.

“If our estimates are correct, this will mark the 12th consecutive decline since February 2017. Our forecast is based on a simple regression model and empirical analysis. We expect month-on-month inflation to flatten out to 0.59per cent (7.33per cent annualized).

“The downward trajectory in headline inflation can be attributed to the decline in most global commodity food prices such as sugar and rice and to a minor extent, the stability of exchange rate between (N363/$-N364/$). A stable exchange rate encourages producers to finally pass through the benefit of cheaper imports to consumers.

“Furthermore, the decline in production levels due to the fall in demand (post-Christmas blues) in January – evident in the sharp fall in FBN PMI to 54.6 from 68.7 in Dec’17 – will taper inflationary pressures.

“The downward trajectory in headline inflation can be attributed to the decline in most global commodity food prices such as sugar and rice and to a minor extent, the stability of exchange rate between (N363/$-N364/$). A stable exchange rate encourages producers to finally pass through the benefit of cheaper imports to consumers.

“Although Inflationary pressures were subdued in the month of January, we are likely to see a reversal in the trend in the coming months. As business activities pick up in the run up to Easter, there will be an increase in aggregate domestic demand which could trigger a further build-up of inflationary pressure.

“Assuming that inflation declines as anticipated, the CBN will find it difficult to respond by lowering the current policy rate (MPR). This is because the National Assembly is yet to ratify the appointments of the new nominees of the President to the MPC. The absence of a quorum will make any policy change almost impossible,” the report added.

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