FDC ECONOMIC BULLETIN – AUGUST 09, 2019 (Re: Headline inflation to drop to a 42-month low of 10.98%)

Dear Subscriber,

We anticipate a 0.24% drop in the headline inflation to 10.98% in July. If accurate, it will be the lowest level since January 2016. The commencement of the harvest season in July led to a boost in output, thus pushing down commodity prices. Money supply impact was also muted by an increase in net OMO outflows (N200.10bn) and forex intervention ($1.21bn).

Our forecast points to a 0.16% decline in the month-on-month inflation to 0.91% (11.50% annualized) in July. All the inflation sub-indices are expected to decline as part of the price moderation momentum.

Even though the projection means the CBN will be closer to achieving its inflation rate of 6-9% target, the probability that headline inflation will fall below 10% and stay there is unlikely at this point in time. This is because the economy could be awash with liquidity due to the CBN’s effort to boost lending to the private sector.

In this publication, the FDC Think Tank shares its estimates for July inflation and likely policy reactions.

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