March 15, 2019/Cordros Report
The latest inflation reading accentuates our view of softer consumer prices over the next few months – See report: Movements in the food basket drives temperance in headline inflation. Evidently, inflation printed largely flat from a month ago (0.73% m/m), albeit rising at a slower pace on a year-on-year basis (-7 bps to 11.31% y/y) due to slower core and food inflation movements.
Looking ahead, we remain largely sanguine on moderation in headline inflation over the month of March, as there are no strong cases for a negative surprise for both the core and food baskets.
Whilst we acknowledged the possible impact of election related spending on March inflation reading, we remain unperturbed. We highlight that the pass-through from February election spending to consumer prices was negligible. Therefore, barring a negative shock to energy prices and exchange rate, we expect core inflation to remain in check.
Elsewhere, our views on food prices align with FEWSNET, which expects favourable weather conditions will continue to help bolster grain outputs, and thus, leaving food prices subdued. Overall, we look for headline inflation reading of 11.22% y/y in March.
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