FDC ECONOMIC SPLASH – JUNE 15, 2024 [Re: Headline inflation rises marginally by 0.26% to 33.95% in May]

Dear Subscriber,

On Saturday, the National Bureau of Statistics released the CPI inflation report for May. Headline inflation, which analysts expected would rise, indeed increased for the fifth consecutive month. However, the uptick was modest, edging up by 0.26% to 33.95% from  33.69% in April, although this was lower than anticipated. The rate of increase moderated from 0.49% in April to 0.26% in May, suggesting a potential stabilization in inflationary pressures. Is this indicative of inflation approaching a point of inflection? While the moderation is a positive signal, caution is advised. Impact of planting season will be more potent in the month of June, alongside speculative effects stemming from minimum wage reviews and increased monetary saturation. These factors could influence the inflation trajectory significantly.

Core sub-index (which is inflation-less seasonality) continued its upward trend to 27.04% from 26.84%. The food price indices increased as well by 0.13% to 40.66% from 40.53%. The planting season, coupled with insecurity threats resulted in supply chain disruption.

Is another rate hike expected in July?

The CBN raised interest rates by 150 basis points to 26.25%p.a. at its meeting in May, marking the third consecutive hike totaling 750 basis points. But following the continuous decline in monthly inflation and slower increase in headline inflation, it appears that the CBN may maintain status quo at the upcoming MPC meeting in June. The decision to hold rates steady reflects a prudent approach aimed at observing whether this downward trend will persist in the coming months. This period of easing inflation could potentially signify that the economy is approaching a turning point, where inflation might stabilize or begin to decrease more consistently.

In the download and link, the FDC Think Tank shares its thoughts on the impact of April’s inflation numbers on the economy.

Enjoy your read…