We are projecting that headline inflation for the month of June will inch up to 11.42% from 11.40% in the previous month. This will be the 3rd consecutive monthly increase in 2019. The uptick in the general price level is seasonally driven because of the planting season. The heavy rainfall and flooding in key regions of the country have also taken their toll. Month-on-month inflation (a better reflection of current prices and inflation expectations) is expected to increase more substantially by 15bps to 1.26% (16.16% annualized).
Though the annual inflation increase will be marginal, the steep rise in monthly price index is a pointer to a build-up in inflationary pressures. This would be a cause for concern of policy makers at the next MPC this month.
Our inflation projection did not take into account the 67% increase in the minimum wage from N18,000 to N30,000. If the new wage is paid with arrears in July/August, it will have an impact on inflation in Q3
In this publication, the FDC Think Tank shares its estimates for June inflation and likely policy reactions.
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