Inflation: Analysts Fear Another Rise in Interest Rate as MPC Meets Today
As the Monetary Policy Committee of the Central Bank of Nigeria starts its two-day meeting on Tuesday (today), analysts have indicated that the committee may raise the Monetary Policy Rate again to tackle rising inflation.
The biting inflation rate had assumed an upward swing in the past few months and the situation had made the MPC to keep raising the MPR.
The MPC team had said in the past that it would be difficult to allow the inflation rate to be significantly higher than the MPC.
Although inflation hit 22.22 per cent in April but analysts at Cordros Research has predicted that the MPC might raise the MPR during this meeting.
The CBN had disclosed that it would hold its 291st meeting in Abuja on Tuesday (today) and Wednesday.
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At the last MPC meeting in March, the Governor, CBN, Godwin Emefiele, had announced the members’ decision after voting to raise the MPR by 50 basis points to 18.0 per cent; retain the asymmetric corridor of +100/-700 basis points around the MPR; retain the CRR at 32.5 per cent; and retain the Liquidity Ratio at 30 per cent.
However, analysts at Cordros stated in its report on ‘MPC likely to raise the MPR further by 50bps’ ahead of the meeting that, “As in the past meetings this year, the committee remains faced with either maintaining its hiking cycle or keeping policy parameters unchanged.
“We expect the committee to remain resolute on the path of smaller rate hikes, after taking the global and domestic events since its last policy meeting into account, more so that the CBN governor already hinted at such a path at the last policy meeting held in March.”
It added that, “On the global scene, systemic central banks are signalling a peak in their interest rate hiking cycles although they are leaving the door open for more tightening if conditions warrant.
“In the domestic economy, headline inflation maintained its upward trajectory, currency pressures remain intact and there are signs the real GDP growth eased in Q1-23 primarily due to the CBN’s naira redesign drive. Overall, we expect the Committee to increase the MPR by 50bps and retain other policy parameters.”
On the expected impact on the equities market, the analysts said, “Looking ahead, we believe investors will focus on the outcome of the MPC meeting scheduled to hold next week to gain further clarity on the movement of yields in the Fixed Income market.
“As a result, we expect cautious trading from domestic investors in the short term. Overall, we reiterate the need for positioning in only fundamentally sound stocks as the uninspiring macro story remains a significant headwind for corporate earnings.”