As the National Bureau of Statistics prepares to announce the inflation rate for December, analysts expect it to drop to 11. 94 per cent, from the 12.3 per cent rate recorded in November.

Analysts at Financial Derivatives Company Limited on Wednesday in a report made available to our correspondent said the 0.36 per cent decline from November’s 12.3 per cent was likely to be as a result of an increase in the supply of commodities, both imported and domestically produced in December.

On the outlook, they said that the initial estimates for price inflation in 2013 suggested that the average rate of inflation would be at 9.24 per cent at the end of 2013.

They said this was as a result of a number of factors including increased productivity and subdued money supply growth.

They also commented on the monetary response, saying, “Given the expected decline in inflation for December and a single digit outlook for 2013, there will be an opportunity for the Monetary Policy Committee to consider moving to a more accommodative monetary stance in late January.

“In other words, the CBN could begin a slow and modest reduction in interest rates, for instance, reduction of the Monetary Policy Rate by 25 basis points to 11.75 per cent per annum.”

The report added that FDC’s Lagos urban inflation index showed that prices of goods and services eased by 0.74 per cent to 11.87 per cent in December.

The decline, according to the analysts, is attributable to the food basket, which dropped by 2.15 per cent for the second consecutive month after the hike due to flooding.

It said that the prices of the commodities that eased included vegetables (leaves), pepper, cassava, yams, beans and rice.

The report said, “The non-food basket rose marginally again by 0.15 per cent to 10.36 per cent in December, probably due to increasing distribution and logistics costs.

“The most noticeable commodities in this category were men’s apparel, cooking gas and building materials. Some non-food prices also declined, these included prices of toiletries, louver blades, air transport and kerosene, while others remained unchanged relative to the levels in November.”

Source: Punch (written by Ademola Alawiye)