- Experts predict MPC tightening of monetary policy
The Central Bank of Nigeria (CBN) is set to tighten further its monetary control in a renewed bid to moderate resurgent inflationary pressure.
The Monetary Policy Committee (MPC), the highest policy-making organ of the apex bank, begins a two-day meeting today with policy response to mounting inflationary pressure as the main agenda.
Analysts’ consensus and sources close to the apex bank were unanimous that the apex bank would increase the benchmark interest rate, the Monetary Policy Rate (MPR), in line with the bank’s avowed focus on curbing inflation and creating a stable investment environment.
The MPC, headed by the Governor of the CBN, provides monetary policies and benchmarks, which determine the direction of the financial services sector, and the economy to a large extent.
Headline inflation rate broke a two-month breather to record two consecutive monthly increases, raising alarms that price pressures remain unabated.
Consumer Price Index (CPI), which had dropped 80 basis points and 125 basis points to 33.40 per cent and 32.15 per cent in July and August respectively, restarted in September with an increase of 55 basis points to 32.70 per cent. It worsened with an increase of 118 basis points to 33.88 per cent in October.
A predictive survey indicated that the CBN may increase the MPR within a range of 25 to 50 basis points on the average, balancing concerns over costs of doing business and the need for proactive response to the renewed pressure.
Managing Director, Financial Derivatives Company (FDC), Mr Bismarck Rewane, said inflation and exchange rate trends would be the main focus of the two-day meeting.
“The decision at the meeting will be based on a nominal anchor. However, with the new inflation rate margin in October at 1.18 per cent, the committee might be prompted to tighten monetary policy again,” Rewane stated.
Cordros Capital stated that inflation risks remain high and the apex bank would hike interest rate to reaffirm its commitment to price stability, anchor inflation expectations and achieve positive real returns.
“Our expectation is a 50 basis points increase in the Monetary Policy Rate (MPR) to 27.75 per cent, with all other parameters left unchanged,” Cordros Capital stated.
READ THE FULL STORY IN THE NATION
