Inflation may decline by 0.25% to 17.5% in July 2021 – Rewane

Inflation rate, which is the average change in the prices of goods and commodity is expected to decelerate by 0.25 per cent to 17.5 per cent in July, Bismarck Rewane, Chief Executive Officer of Financial Derivatives Company (FDC) has said.

The Nigerian Bureau of Statistics (NBS) is yet to come out with its figure.

But the FDC recent publication said, the monthly sub-index (a more current measure of prices) is also expected to reverse its 2-month upward trend, declining to 1.01 per cent (12.75 per cent annualized). This is consistent with the 1.28 per cent decline in the global food price index to 123.0 points and the 3.02 per cent drop in the AFEX commodity price index to 451.45 points in the month of July. We expect all other inflation sub-indices to moderate in July with core and food inflation falling to 13.6 per cent and 21.9 per cent respectively.

Rewane said inflation is becoming a hydra-headed problem in the world over and that most advanced and developing economies are reporting inflation rates higher than their targets. For instance, inflation in the US spiked to a 13-year high of 5.4 per cent compared to a target of two per cent. This is largely due to expenditure initiatives {infrastructure bill ($2 trillion), COVID stimulus package} and pandemic-related supply shocks. There is a raging debate as to whether inflation this time is transitory or structural. The comforting news is that price inflation without an increase in wages (wage inflation) tends to be transient.

But in Nigeria, annual inflation moderated for three consecutive months to 17.75 per cent in June. The divergence between the global and Nigerian inflation trends has been a subject of controversy in the last three months. It was more disturbing that the published data seemed not to reflect market reality. Economists have attributed these diverging trends to ‘the outside lag’ and ‘consumer price resistance’. The outside lag is the time lag between when policies are implemented and when the economy or markets begin to feel the impact.

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