TUE. 21 MARCH 2023-theGBJournal | The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rose from its meeting with a decision to raise Key Policy Rate Further by 50bps to 18%, in line with our expectation.
The MPC at its second meeting of the year, voted to raise the Monetary Policy Rate (MPR) further by 50bps to 18.0%, and retained the asymmetric corridor of +100/-700bps around the MPR, the CRR at 32.5% as well as the liquidity Ratio at 30.0%.
It will be recalled that at the last policy meeting held in January, more members voted for a 50bps increase in the MPR compared to the voting pattern since the interest rate hiking cycle began in May 2022.
A glance through the personal statements of the MPC members showed that the CBN Governor was among the four members that favoured a 50bps hike at the last policy meeting.
The key reasons granted by members in favour of a 50bps increase at the last policy meeting include cautious action that returns inflation within tolerable levels and minimises output loss and the need to balance the risks of under-and-over-monetary tightening.
The sustained elevated price pressures in February remains a cause of concern to Committee members, more so that the headline inflation is expected to remain sticky in the coming months.
At the same time, the downside risks to economic activities have increased, worsened by the currency redesign drive.
After the moderation witnessed in December, inflationary pressures rose for two consecutive months, settling at 21.91% y/y in February (January: 21.82% y/y).
The persistent increase in price pressures primarily reflects intermittent PMS scarcity and the associated fuel price increases and low food supply exacerbated by restricted access to fertilizer and high conflict incidences.
Overall, in February, food prices rose by 3bps to 24.35% y/y while the core inflation moderated by 32bps to 18.84% y/y.
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