FDC ECONOMIC BULLETIN – OCTOBER 09, 2019 (Re: Inflation Set to Buck its Declining Trend)

Dear Subscriber,

Border Closure – Nothing like a Temporary Government Program – Friedman

The government’s announcement of a temporary closure of the borders was met with considerable apprehension. It is now 50 days with no end in sight. It reminds us of a quote by the Nobel economist and one of the world’s most celebrated thinkers, Milton Friedman of the University of Chicago who said “Nothing is so permanent as a temporary government program”. It is in this context that we publish the inflation projections for September 2019.

Inflation to Spike in September

Our survey points to a likely increase in headline inflation in September to 11.22%. This is coming after three months of consecutive decline. The spike is partly due to the closure of the borders and other inflation stoking factors including money supply growth. Milton Friedman also said that inflation is always and everywhere a monetary phenomenon. Broad money aggregate has increased by 5.65% as stated in the MPC communique. More disturbing to policymakers is our projection that monthly inflation is also likely to spike to 1.01% (12.87% annualized). If these projections are borne out, the MPC is likely to seriously consider the resumption of a tightening cycle in November. However, in a fluid policy making environment, nothing is certain. As they say, it ain’t over till the fat lady sings.

In this publication, the FDC Think Tank shares its estimates for September inflation.

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