The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) lifted the country’s Monetary Policy Rate (MPR) from 18.5 percent to 18.75 percent. Mr Folashodun Shonubi, Acting Governor of the Central Bank of Nigeria, stated this on Tuesday while presenting the MPC meeting statement.
Shonubi further stated that the committee reduced the asymmetric corridor around the MPR from +100/-700 to +100/-300 basis points, kept the Cash Reserve Ratio (CRR) at 32.5 percent, and kept the Liquidity Ratio at 30%.
According to Shonubi, the committee has just two policy options: retain the policy rate or modestly raise it to counteract the moderate increase in headline inflation.
“Considering the option to hold, the committee reviewed the impact of the continued rise in inflation on various macroeconomic variables, noting the potential dampening effect on output growth.
“Members agreed unanimously that the previous series of rate hikes had indeed greatly moderated the pace of price development and was gradually but steadily yielding the expected outcome.
“The option to continue to hike the policy rate, albeit moderately, also presents a strong alternative,” he said.
He said this was premised on the expected liquidity injections into the economy, from the recent policy developments and the likely impact on inflation.
“The committee remained cautious in arriving at a policy decision as members noted the need to continue to support investment, ultimately leading to the recovery of output growth.
“The balance of these arguments thus, leaned in favour of a moderate rate hike, to sustain efforts at anchoring inflation expectation, narrow the negative real interest rate gap, and improve investor confidence.
“The MPC, thus, resolved by a majority vote to raise the Monetary Policy Rate (MPR) by 25 basis points. Six members voted to raise MPR by 25 basis points while five members voted to hold the MPR Constant.
“All members, however, voted to narrow the asymmetric corridor from +100/-700 to +100/-300 around the MPR,” he said. #CBN Hikes Benchmark Interest Rate to 18.75%
