Year on year inflation jumps close to 12% just as policy makers grapple with the potential impact of the minimum wage and the increase in VAT. The silver lining in the cloud is that the month on month inflation declined to 10.85%. This means that the base year effects may be waning and local output is likely to rise in Q2
The CBN must be wondering how national savings will be mobilized when inflation is 9% higher than 90 day T/bill rates.
Probability of a policy change much higher
The expectation of higher costs of goods increases the possibility of a change in the CBN’s current stance to a tightening position in the first quarter of the year. This may mean that the era of lower interest rates is slowly coming to an end.
In this publication, the FDC Think-Tank analyzes the inflation data for December and likely impact on policy and markets.
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