In spite of the fresh 17-year high inflation rate recorded in September, Bismarck Rewane, Chief Operating Officer (COO) of Financial Derivatives Company (FDC) Limited assured that, the worse may be over, saying the pace of increase in general prices has slowed and that the Monetary Policy Committee (MPC) may not continue its monetary policy tightening regime.
“Even though the uptick in headline inflation was sustained, the pace of increase in the general price level has slowed significantly.
“This reinforces the view that inflation is almost at a tipping point and set to decline in fourth quarter (Q4)”, said Rewane in the FDC latest publication, following the release of the data by the National Bureau of Statistics (NBS)..
NBS released the September inflation data yesterday, and as expected, Nigeria’s official headline inflation increased again by 0.25 per cent to 20.77 per cent. This is the 8th consecutive monthly increase and a 17-year high..
He added that, “despite the sustained increase in headline inflation, we do not expect the MPC to continue with its tightening cycle at its next meeting in November. This is because in the last five months, the 364-day T/bill rate has been increased by 650bps to 13.0 per cent per annum from 6.49 per cent.”
This general increase in the level of interest rates is having a major negative and disruptive effect on stock market valuation, because of the inverse relationship between stock prices and interest rates. Because of the possible decline in the rate of inflation, the CBN is more likely to be tentative about further interest rate increase.
Rewane said, an in-depth analysis of the inflation data showed that all annual sub-indices increased while most monthly sub-indices declined.
While food prices are beginning to show signs of moderation, core inflation remains elevated.
