A further decline in m/m inflation
The latest inflation report from the NBS shows headline inflation y/y at 16.0% in September: this was the eighth successive slowdown, albeit by just 3bps on this occasion. Our expectation, shared with wire service polls of analysts, was an uptick to 16.3% y/y. Core inflation slowed from 12.3% in August to 12.1% y/y while food price inflation was 7bps higher at 20.3% y/y.
- Policymakers will note that the m/m rate for all three measures declined in September for the third month in succession: by 19bps for the headline measure, by 13bps for core inflation and by 27bps for food prices. They can therefore conclude that there is a movement towards general price stability.
- The CBN’s reference range for the headline rate, for what it is worth, is a y/y target of between 6.0% and 9.0%. We do not see the attainment of this range before 2019.
- For imported food prices September brought both m/m and y/y increases. Given the stability of the fx rate in the various windows in recent months, the first probably reflected rises in the dollar price of individual food commodities.
· As for the stance of the monetary policy committee (MPC), the communique after its meeting in late September noted several reasons for stubbornly high food price inflation including a weak harvest. The MPC also indicated that it did not anticipate significant gains on GDP growth (higher) and inflation (lower) much before Q1 2018.
· We see the headline rate at 15.9% in October.
Sources: National Bureau of Statistics (NBS); FBNQuest Research