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Inflation projected to rise further to 13.2%

By on May 6, 2016

The Financial Derivatives Company Limited (FDC) has predicted a steep rise in year-on-year April inflation to 13.2 per cent, 0.4 per cent higher than the 12.8 per cent recorded in March.

The expected rise in the inflation figures would be the fourth consecutive monthly increase in 2016.

The Lagos-based firm, which stated this in its latest economic bulletin obtained yesterday, stressed that its forecast is accurate, it will be head-turning for the Monetary Policy Committee (MPC), “which have barely recovered from the spike in March.”

“The lingering fuel scarcity was debilitating to economic activity and pressurised consumer prices in April. Additionally, rising transport costs and seasonality are also driving increase in costs of food staples and perishables. A disequilibrated exchange rate and its distortionary impact on monetary stability is beginning to feed through the system for a prolonged period,” it added.

Following the 100 basis points hike in monetary policy rate (MPR) at the last MPC meeting, “the CBN was under pressure to increase policy rates again. With real returns back in negative territory, the CBN will have to deliberate on the efficacy of using interest rates to contain the current inflationary trend. The absence of a foreign exchange policy, which still continues to be a major factor leading to uncertainty, has to be addressed at the MPC.

“We estimate a slight slowdown in inflation in May towards 12.5 per cent due to consumer resistance following the sustained rise in consumer prices. As the production possibility frontier increases, prices of goods are expected to decline.”

The report showed that the inflationary trend across Sub-Saharan Africa continues to be a mixed bag, stating that countries that witnessed higher price levels were Ghana and Angola. The underlying reason for the increase in inflation those countries was weakened currency. Ghana’s inflation rate accelerated to 19.2 per cent in March from 18.5 per cent in February due to sharp rises in transportation costs, clothing and footwear. Angola’s inflation rate was higher at 23.6 per cent from 20.6 per cent in February due to increasing healthcare, food and drink prices.

 

[ThisDay]