Capital Flow, Inflation Top Agenda At MPC
Members of the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) will today converge on Abuja for a two-day meeting.
They are expected to take measures for more foreign capital inflow and curtail capital flow reversals and rising inflation which stood at 11. 98 per cent in December.
The 275th meeting of the MPC and the first for the year, is expected to keep all policy rates unchanged. That decision will prevail despite rising calls from economic experts for the committee to lower benchmark interest rate.
Expectedly, the MPC will retain the Monetary Policy Rate (MPR) – benchmark interest rate at 13.5 per cent; Cash Reserve Ratio (CRR) at 22.5 per cent and Liquidity Ratio (LR) at 30 per cent as well as the retention of the Asymmetric corridor at +200 and -500 basis points around the MPR.
In emailed report to investors, Financial Derivatives Company Limited, said: “ Headline inflation increased by 13 basis points to 11.98 per cent from 11.85 per cent in November. This means that inflation averaged 11.39 per cent in 2019 from 12.15 per cent in 2018.
The increase in the consumer price index was partly due to higher money supply and seasonal demand in December. Rising inflation will be a key consideration of the Monetary Policy Committee (MPC) at its next meeting on January 23/24. This increases the probability that the Committee will tighten its policy stance”.
Other analysts said the committee will maintain status quo on all policy rates. He said the committee will not want to tamper with the policy rates at this period of electioneering.
According to other analysts at the investment and research firm, developments in the global economy and financial markets are likely to be viewed with mixed feelings by the MPC.
At their last meeting, the MPC members assessed the macroeconomic environment in 2019 and noted the modest stability thus far achieved in domestic prices, output growth and the financial system.
The committee noted that the economy was on the right path but some key sectors continued to experience significant challenges.
The MPC, however, expressed concern about the tepid growth expectations and growing uncertainty in the global financial markets arising from the poor reception of the Brexit deal by British politicians, continuing trade war between the US and her major trading partners, as well as the commencement of U.S. sanctions on Iran.
The committee believed that although the domestic economy was recovering modestly from recession, however, the recovery was tepid and efforts should be stepped up to strengthen aggregate output and demand.