Dear Subscriber,
The National Bureau of Statistics (NBS) released the September inflation data this afternoon. As expected, Nigeria’s official headline inflation increased again by 0.25% to 20.77%. This is the 8th consecutive monthly increase and a 17-year high. Even though the uptick in headline inflation was sustained, the pace of increase in the general price level has slowed significantly. Also, month-on-month inflation, which is a more current measure of price movement declined sharply by 0.41% to 1.36% (annualized at 17.61%). This reinforces the view that inflation is almost at a tipping point and set to decline in Q4.
Will the MPC increase interest rates again?
Despite the sustained increase in headline inflation, we do not expect the MPC to continue with its tightening cycle at its next meeting in November. This is because in the last 5 months, the 364-day T/bill rate has been increased by 650bps to 13.0%p.a from 6.49%p.a. This general increase in the level of interest rates is having a major negative and disruptive effect on stock market valuation, because of the inverse relationship between stock prices and interest rates. Because of the possible decline in the rate of inflation, the CBN is more likely to be tentative about further interest rate increase.
In the download, the FDC Think Tank shares its thoughts on the impact of September inflation numbers on the economy and policy environment.
Do enjoy your read…
