Headline inflation to increase in December to 12.10%
Based on our survey, headline inflation is projected to jump by 0.25% to 12.10% in December. If accurate, it will be the 4th consecutive month that headline inflation has increased. The last time this happened was in 2016 when the economy suffered from a severe growth contraction leading to a recession. In recent times, the spike in the year-on-year headline inflation is largely due to money supply saturation, lower interest rates, increased seasonal demand and base year effects of the border closure.
Happily, the month-on-month inflation is likely to decline to 0.97% (12.25% annualized). This means that Nigerians are probably bypassing the border closure. But more disturbing is the fact that core inflation (inflation less seasonalities) is expected to increase again to 9.2%.
A consistent increase in price inflation could force a monetary policy U-turn on interest rates earlier than anticipated.
In this publication, the FDC Think Tank shares its estimates for December inflation and likely policy reactions.
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