Monday 23, July 2018 by Bloomberg

Nigerian inflation at 2.5-year low unlikely to spur rate cuts

 

The Monetary Policy Committee has held its key rate at 14 per cent for two years to curb inflation and help support the currency in Africa’s largest oil producer.

Nigerian inflation at a 2.5-year low is unlikely to move the central bank to start easing rates this week.

Consumer inflation slowed to 11.2 per cent from 11.6 per cent in May, the Abuja-based National Bureau of Statistics said in an emailed report Monday. That’s higher than the 10.9 per cent median estimate in a Bloomberg survey.

The Monetary Policy Committee has held its key rate at 14 per cent for two years to curb inflation and help support the currency in Africa’s largest oil producer. It will continue to hold on Tuesday, according to all but one of the 10 economists in a Bloomberg survey. Price growth still exceeds the authorities’ target band of six to nine per cent.

“The figures do not change the dynamics for tomorrow,” Michael Famoroti, an economist at Vetiva Capital Management Ltd., said by text message. “Today’s figures reinforce our view that the MPC will hold rates to tackle rising inflationary pressure.”

Increased spending from Nigeria’s record 2018 budget of NGN 9.12 trillion ($25 billion) and ahead of next year’s election would lead to more price pressure, according to Governor Godwin Emefiele.

There are “concerns about inflationary pressure building up towards the second half of the year in part because of the bigger than proposed budget,” Yvonne Mhango, an economist at Renaissance Capital in Johannesburg, said by phone. “They will probably err on the side of caution and hold the rate,” Mhango said.

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