• Saturday, October 05, 2024
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Nigeria eyes inflows on US inflation drop, imminent rate cut

Nigeria eyes inflows on US inflation drop, imminent rate cut

The U.S. inflation slowed for the second time in August to a three-year low of 2.5 percent, easing the decision of the Federal Reserve to cut interest rates and drive capital inflows into emerging economies like Nigeria.

According to the US Labor Department, consumer prices dropped to 2.5 percent in August from 2.9 percent in July 2024. However, on a month-on-month basis, it increased to 0.2 percent from 0.3 percent in July 2024.

US inflation has gradually declined but a few categories like housing remain stubbornly high.

Federal Reserve officials are widely expected to make their first interest rate cut in more than four years next week, and recent inflation readings are within the Fed’s target.

Read also: US inflation eases to 2.5% boosting Fed rate cut 

Earlier this month, Federal Reserve Chair Jerome Powell had, during the Jackson Hole symposium, hinted at a potential easing of monetary policy.

Analysts have said that Nigeria is expected to be among the emerging markets that will attract significant foreign capital inflows

“Nigeria’s carry trade is very appealing at the moment, one of the highest in Africa. A rate cut by the US Fed is likely to support capital flows to emerging and frontier markets, which Nigeria will certainly benefit from,” Samuel Gbadebo, fixed-income analyst at CardinalStone, said.

Matilda Adefalujo, fixed income analyst at Meristem Securities, said that the imminent rate cut will make borrowing cheaper in the US to invest in other countries.

“It will be cheaper for foreign investors to borrow some funds in the US and come and invest in Nigeria and that way it’s positive for Nigeria through capital inflow,” Matilda said.

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