The blip could become a trend
In line with our projection and general consensus, headline, food and urban inflation all spiked in October. Headline inflation which measures the year-on-year change in prices increased to 11.61% (the highest level in 17 months). This will be the second month in a row that inflation has increased after few months of price deceleration. The sharp increase in the general price level was largely due to supply shocks emanating from the border closure and intensified rainfall.
Rising inflation puts the MPC on the spot
The monthly inflation when annualized is at 13.69%, which is a major red flag. This puts the MPC on the spot at the upcoming meeting next week. This meeting will be holding on the same day as the GDP data for Q3 is released. If the numbers come in lower than expected, the committee will be confronted with a policy dilemma.
Wage-induced inflation could be rearing its ugly head
The minimum wage impact is yet to be factored into the price inflation equation. All of these variables are setting the stage for a December of hard choices and limited options.
In this publication, the FDC Think-Tank analyzes the inflation data for October and its impact on the economic policy environment.
Do enjoy your read…