Dear Subscriber,

The August CPI (inflation report) was released yesterday, Six days before the September MPC meeting. The headline inflation rate slowed to 32.15%, which is lower than the July’s rate of 33.40%. This is the second consecutive monthly decline and the lowest level in the last six months. The month-on-month inflation rate also slid to 2.22% (annualized: 30.07%) from 2.16% in July.

This continued moderation in inflation can be largely attributed to base year effects and the harvest season. Food inflation declined further to 37.52% from 39.53% as the prices of key staples like yam, tomatoes, potatoes, and pepper fell due to increased supply.

CBN likely to keep interest rates unchanged

The current trend of disinflation, along with the positive news on Q2 GDP growth (3.19%), is likely to influence the MPC’s decision next week. Most analysts are of the view that MPC will maintain the status quo at 26.75% p.a.(MPR).

However, the upward trend in the core inflation rate to 27.58% suggests that inflation risks remain elevated. There is likely to be a reversal in the trend of headline inflation in September, following the impact of the new petrol price shock and the transmission effects of the 62.22% growth in the money supply aggregates. In a nutshell, we expect that the moderation in inflation will become noticeable at the end of the year.

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

Enjoy your read…