Culled—-Proshare

Wednesday, May 4, 2016 9:12AM/ FDC

We are projecting a steep rise in YoY April inflation to 13.2%, 0.4% higher than that of March (12.8%). This will be the fourth consecutive monthly increase in 2016. If our forecast is accurate, it will be head-turning for the 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.

Upcoming MPC meeting
Following the 100 bps hike in MPR at the last MPC meeting, the CBN is 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.

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