The U.S. inflation slowed for the second time in August to a three-year low of 2.5 per cent, easing the decision of the Federal Reserve to cut interest rates and hence the rush of capital inflow into emerging economies.
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 per cent from 0.3 per cent 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.
Earlier this month Federal Reserve Chair Jerome Powell 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 rate cut in September 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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