“The Composite Consumer Price Index (CPI) rose by 6 percent year-on-year in April 2011. This is lower than 12.8 percent recorded in the previous month in the new CPI series. The monthly change of the CPI was 0.26 percent decrease when compared with March 2011”. Thus says the National Bureau of Statistics (Nigeria).
Despite strong anecdotal evidence to the contrary, including firmer prices at the “grocer’s” (“average monthly food prices rose by 2.5 percent in April 2011 when compared with March 2011 figure”) and strong election-related spending (“all items less farm produce” index was up), the NBS’ point is that domestic price levels for April 2011 have risen a lot slower than they did same time last year. Coming ahead of the Central Bank of Nigeria’s rate-setting committee (MPC) meeting next week the new inflation data, are particularly timely. One argument for falling rates is that the strong signal by the MPC of its readiness to combat inflation conveyed at its last meeting may have helped moderate inflation expectations, and thus sterilised the expansionary effects of the election spend.
However, given doubts about the dynamics of the domestic transmission mechanism, this is one very hard call to make.
On balance, therefore, I expect the MPC to keep rates unchanged at the end of next week’s meeting.