In times of economic uncertainty, alignment of policy goals and coordinated execution helps to reduce investor anxiety. Forex rationing, negative real rates of interest and fiscal counter cyclical spending are used to increase output and moderate price inflation.
Our projection based on our market survey is that headline inflation will increase towards a range of 13.56%-13.63% in September and is likely to maintain this trend in Q4’20. Supply chain disruptions (logistics) and output constraints (flooding and security challenges) combined with money supply saturation are likely to compound the inflationary pressures. All other inflation sub-indices are expected to move in tandem with headline inflation.
If our forecast turns out to be accurate and the Q3 GDP data scheduled to be released on November 23rd (same day as the MPC meeting) comes in worse than expected, the outcome of the meeting will be a tough call.
In the publication, the FDC Think Tank shares its estimates for September inflation and likely policy reactions.
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