UPDATE: Why we Jerked up Interest Rate – Cardoso
The Central Bank of Nigeria (CBN) governor, Olayemi Cardoso, has said that the hike in interest rates is a response to the current inflationary pressures and the need to stabilise the Naira.
Mr Cardoso made the clarification during a press briefing after the first Monetary Policy Committee (MPC) meeting held on Monday and Tuesday in Abuja.
“The Committee’s decisions were centered on the current inflationary and exchange rate pressures, projected inflation, and rising inflation expectations.
“Members were concerned about the persistent rise in the level of inflation and
emphasised the Committee’s commitment to reverse the trend as the balance of risk leaned towards rising inflation.
Read Also:
“The Committee, however, acknowledged the trade-off between the pursuit of output growth and taming inflation but was convinced that an enduring output expansion is possible only in an environment of low and stable inflation.
“Members noted the decision to transit to an inflation targeting framework as essential to addressing the persistence of inflationary pressures in the economy and commended the fiscal authority for their invaluable support.
“In the opinion of the Committee, the options available for decision was to either hold or hike the policy rate to offset the persisting inflationary pressure. Considering the option of a hold policy, the evidence revealed that previous policy rate hikes have slowed the rise in inflationary pressure but not to a desirable extent.
“Members considered various scenarios of hold and hike, and concluded that, inflation could become more persistent in the medium-term and thus pose more regulatory challenges if not effectively anchored. The balance of the argument thus leaned convincingly in favour of a significant policy rate hike to drive down inflation substantially,” he said.
