Year-on-Year inflation declined significantly in the month of May to 16.25%. The magnitude of this decline is the largest in 4 years. This slowdown in inflation was in line with market consensus and is primarily as a result of declining base year effects.

A slowdown in inflation is likely to increase the possibility of a shift in monetary policy towards a more accommodative stance. Already, in the secondary market, the 90 day T/bill rate has dropped by over 400 basis points to 13.94%p.a. However, inflation is still very high and the CBN has an inflation target of 11% for 2017. At this point in time, it is difficult to predict the next move by the MPC in July.

In the attached bulletin, the FDC Think-Tank analyses price movements in May.

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