MPC: Why we Jerked up Interest Rate to 26.75% – Cardoso

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has again increased the benchmark interest rate by 50 basis points from 26.25 per cent to 26.75 per cent.

This was disclosed by the Governor of the CBN, Olayemi Cardoso, who doubles as MPC Chairman, at the end of the 296th meeting which was held on Monday and Tuesday in Abuja.

Cardoso disclosed that the MPC raised the MPR by 50 basis points to 26.75 per cent and raised the asymmetric corridor around the MPR from +100/-300 basis points to +500/-100.

The MPC however retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45 per cent, and held the liquidity ratio at 30 per cent.

Revealing the considerations of the MPC in a chat with journalists, Cardoso said: “The key focus of the MPC at this meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation.

Recall that last week, Nigeria’s inflation rate rose to 34.19 percent amid the surge in food prices.

According to the CBN governor, the decision to further increase the interest rate is to tackle the country’s rising core inflation and food inflation which stood at 34.19 per cent and 40.87 per cent, respectively in June.

He said the Committee noted that the increase in the interest rate is aimed at curbing inflationary pressures and achieving price stability.

The MPC also expressed optimism that the recent measures taken by the fiscal authority to address food inflation will yield positive results.

His words: “In addition, the Committee emphasised the need for a sustained collaboration between the monetary and fiscal authorities to address the challenges facing the economy.

“The MPC also commended the Federal Government’s efforts to improve domestic refining capacity, which is expected to reduce foreign exchange expenditure on imported petroleum products.

“The Committee’s decision to raise the interest rate was largely expected by market analysts, who believe that the move will help to reduce inflationary pressures and stabilise the economy.

“The increase in the interest rate is also expected to have a positive impact on the value of the naira, which has been under pressure in recent times due to inflationary pressures and foreign exchange demand.”