With barely a few days to the release of the December 2013 inflation figures by the National Bureau of Statistics , economic watchers said at the weekend that the single digit inflationary trend, which dominated the preceding year will hold sway when the latest figures hit the public domain. In two separate reports, two research and investment banking firms, Dunn Loren Merrifield Limited and Financial Derivatives Company Limited , which beamed their searchlight on the economy ahead of the NBS announcement, put inflation figures at 7.95 per cent and 7.8 per cent respectively, citing seasonal trends, the stability of the naira in the forex market and negative growth in money supply of 7.39 per cent in October 2013 as reasons for the single digit threshold expected for the month of December. Analysts from Dunn Loren, who estimated a slight increase in the headline inflation rate, maintained that the development will not impact the outcomes of the January 20 , meeting of the Monetary Policy Committee (MPC), pointing out that the monetary policy rate (MPR), the benchmark interest rate, currently at 12 per cent, will not be changed. According to the report, the seasonal trends from January to December, to a large extent, explained the inflation level for December 2013 . However, FDC, in its report made a forecast of a decline in the Consumer Price Index from to 7.8 percent from the prevailing figure of 7.9 perent. "Our forecast is that the CPI will decline marginally to 7. 8 per cent from 7.9 per cent in November. The price level is within the target range of the Central Bank of Nigeria (CBN) for 201 4. "The reasons for the moderation in the price level include, the stability of the naira in the forex market and negative growth in money supply of 7.3 9 per cent in October 2013 . Money Supply is now N14.73trillion. Other factors include the higher rates of interest in the money markets and the contractionary stance of the CBN," the report stated. It maintained that the monetary policy would remain unchanged given the fact that the "monetary policy environment has become more politically charged with the impending exit of the CBN Governor. The next MPC meeting is scheduled for 20th/ 21st January 2014 . Based on normal assumptions, we expect that the monetary stance will remain unchanged or even tighter. The AMCON bonds that have just been redeemed and the need to support the naira suggest that the CBN will be more hawkish. However, in view of the political tension and the lame-duck effect of the outgoing governor, we expect the status quo to be maintained. "In the event that there is further contraction by increasing the CRR for public deposits to 75 per cent, the impact will not be as profound as earlier tightening cycles. This is because of the current excess liquidity in the system. Interest rates in January have averaged 10.71 per cent per annum and will remain tentative till the MPC meeting," the FDC said in the report. The report by Dunn Loren had explained that "The food CPI (consumer price index) constitutes a large proportion of the CPI Basket and seasonal patterns may vary based on harvest levels per crop. Our other estimate follows seasonal trending over a six-month period, which has shown significance over time. Our forecast for December stands at about 7.95 per cent, representing an increase of 5 basis points from the 7.90 per cent recorded in the previous month."
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