Sunday, 26 May, 2019

RBI may hike rates again in August on rise in inflation

The previous high in retail inflation was in January this year at 5.7 per cent The previous high in retail inflation was in January this year at 5.7 per cent
Ginger Lawrence | 14 June, 2018, 11:16

Nigeria's annual inflation has dropped to 11.61% in May, below the federal government's projection of 12.42% set in the 2018-2020 Medium Term Expenditure Framework and Fiscal Strategy Paper.

This about 0.41 per cent point lower than the 15.20 per cent recorded in April 2018.

The retail inflation rate in urban areas was 4.88% in May, against 4.42% in April.

Headline inflation surging to a four-month high of 4.87 per cent in May is likely to force the Reserve Bank of India (RBI) to hike rates once again at its August monetary policy review, analysts said.

"With both core and headline inflation only likely to face greater upside pressure from various factors in the coming months, we continue to expect one more 0.25 per cent rate hike from the RBI".

"This is 0.87 per cent points less than the 13.34 per cent recorded in April, and represents the sixteenth consecutive disinflation since January 2017".

The average annual rate of change of the food sub-index for the 12-month period ending May 2018 over the previous 12-month average was 18.36 per cent, 0.53 per cent points from the average annual rate of change recorded in April by 18.89 per cent.

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The measure of price changes in the economy, which helps to guide the decisions of interest rate setters at the Bank of England (BoE), did not rise in May compared to April.

Inflation rate reduces by 0.87% from April.

According to the report, the corresponding twelve-month year-on-year average percentage change for the urban index was 15.10 per cent in May.

The rise in the index was attributed to increases in prices of some staple food items like potatoes, yam and other tubers, vegetables, fish, bread and cereals, fruits and meat.

On month-on-month basis, the report noted that the urban index rose to 1.1 per cent in May from 0.85 per cent in April, while the rural index also rose to 1.08 per cent in May from the 0.82 per cent recorded in April.

In addition, it stated that the rural inflation also eased 11.20 per cent in May from 12.13 per cent in April.

On month-on-month basis, the core sub-index increased by 0.98 per cent in May 2018, up by 0.11 per cent when compared with 0.87 per cent recorded in April. Kogi followed with 9.07% while Delta recorded 9.22% on a year-on-year all item basis in May, 2018.