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Analysts: Falling inflation boosts chance of rate cut

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Following latest data from the National Bureau of Statistics (NBS) which shows inflation continuing downward trend to 12.48 per cent in April, ana- lysts at Financial Derivatives Company (FDC) have predicted that the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) is likely to cut interest rates at its meeting next week.

 

The analysts stated this in a note obtained by New Telegraph on Tuesday. According to the analysts, the declining inflation rate as well as sustained high oil prices is significant good news for the nation’s economy.

 

They also pointed out that the outlook for agric prices, especially grain prices, was positive as forecast for good weather suggests an increase in output and a fall in prices.

 

The NBS had last Tuesday released the Consumer Price Index (CPI) which measures inflation, with the index dropping from 13.34 per cent in March to 12.48 per cent in April.

 

The NBS, in the report, said this was the 15th con-  secutive month that the inflation rate would be experiencing continuous decline.

 

It would be recalled that CBN Governor, Mr. Godwin Emefiele, had said in January this year that the MPC may start cutting interest rates in the first half of the year as inflation eases. He had reportedly said that once inflation gets to low double digits, “and high single digit happens, then it should be easy for the MPC to begin to look at easing.”

 

“I want to think that between the end of the first and second quarter, we should begin to see easing. Inflation is “treading downwards, but a little bit sticky downwards. We believe that the rate of moderation will improve in the coming months,” Emefiele was quoted as saying. Despite maintaining a downward trend in April, the inflation rate is still above the CBN’s six per cent to nine per cent target band.

 

The MPC is scheduled to hold its second meeting of the year on Monday and Tuesday next week. The Committee held its first meeting of the year in April at which it retained the benchmark interest rate at 14 per cent, where it has been since July 2016.

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