Briefing Note: March 7th 2016: Inflation to Trend Up.
With the increase in prices of petrol caused by the scarcity and the violence ongoing in North East and the Middle Belt it will be safe to assume the inflation rates will trend up. This then has the consequence of moving the interest rates up as well…
Higher interest rates mean higher borrowing costs for SMEs and the Governments….it also means a “loss” for fixed income securities..
Which has the consequence of increasing the cost of business locally and putting pressure on the Naira, causing a run to the dollar
Food prices especially are key…foodstuffs especially tubers make up the bulk of the Consumer Price Index….if food prices trend up, inflation will trend up.
In terms of targeted action, its essential food prices are kept low…..
In terms of Asset Classes,
Fixed Income: review your bond holding and mark to market, are you in the black? If rates are trending up, bond prices should be falling.
Equities: In a period of rising fixed income, stocks do not achieve optimal return..
What is essential now is liquidity to take advantage of arbitrage opportunities.
