Headline inflation rate moderated for 10 straight months in 2017, from 17.8 percent in Feb 2017 to 15.9 percent in Nov 2017. 
Weaker than expected fall in general price level was traceable to the unrelenting pressure on food prices which kept average m/m inflation rates above 1.4 percent from January to August-2017 (vs. 0.9 percent from 2013-2016), before easing to 0.8 percent between September to November 2017.
In 2018, moderation in price level should be faster if m/m inflation remains below 1.0 percent as observed since September 2017. A m/m inflation rate averaging 0.7 percent, for instance, should drive headline inflation below 10 percent by year-end, all factors held unchanged.
In 2018, moderation in price level should be faster if m/m inflation remains below 1.0 percent as observed since September 2017. A m/m inflation rate averaging 0.7 percent, for instance, should drive headline inflation below 10 percent by year-end, all factors held unchanged.
Yet, this is an overly optimistic view when potential risks such as minimum wage review; fuel scarcity; electricity tariff review and increased political spending, are considered.
Consequently, we estimate headline inflation to average 12.2 percent in 2018.
Consequently, we estimate headline inflation to average 12.2 percent in 2018.
This is on the assumption that the economy will be more stable in H1-18, with m/m inflation averaging 0.8 percent for the period.
On the flip side, the on-set of election spending, wage review and increased uncertainties anticipated to dominate a significant part of H2-18, may pressure in m/m inflation above 1.0 percent, driving headline inflation rate higher.
(C) United Capital Plc
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