Surprisingly, year-on-Year inflation declined sharply in the month of December to 15.37%. This will be the 11th consecutive decline in YoY headline inflation in 2017. Also, month-on-month (MoM) inflation declined to 0.59% (7.31% annualized) from 0.78% (9.77% annualized) in November. This steep drop in MoM inflation can be attributed to a massive increase in aggregate output in the final months of 2017.
According to the NBS, the transport index remained flat despite the fuel scarcity experienced in December. This may be due to the delayed transmission effect of the shortages on the general price level.
The steep decline in inflation will mount immense pressure on the committee to take an accommodative stance on the MPR, as it will be difficult for any hawk in the MPC to argue against easing rates at this time.
In the attached bulletin, the FDC Think-Tank analyses inflationary movements in December and the likely policy implications.
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