Headline inflation to inch up again to 12.05% in January
We expect another hike in January headline inflation to 12.05% from the current level of 11.98%. This will be the 5th consecutive monthly increase in the year-on-year inflation rate. However, the pace of increase is slowing from 0.36% in October 2019 to 0.07% in January 2020, primarily because of the reduction in the base year effects and a squeeze in general purchasing power. The MPC, at its last meeting, emphasized the determination of the CBN to rein in inflation because of its negative impact on GDP growth and unemployment. Consistent with headline inflation, we also expect that food and core inflation rates would increase to 14.7% and 9.4% respectively.
Month-on-month inflation to slide to 0.81%
Even though the year-on-year inflation has been rising, month-on-month inflation has been decreasing in recent times and is expected to decline again to 0.81% (10.20% annualized) in January. The monthly price index is a better reflection of current price trends, confirming the notion that inflation may be approaching a point of tapering. This may indicate that recent policy measures are beginning to bear fruit and inflation expectations will get more muted in the near term.
In this publication, the FDC Think Tank shares its estimates for January inflation and outlook for the near term.
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