TUE NOV 26 2024-theGBJournal| The Central Bank of Nigeria today raised its key interest rate as the markets expected, making it sixth consecutive hike following a move earlier this year.
The apex bank’s Monetary Policy Committee (MPC) voted unanimously to raise the Monetary Policy Rate (MPR) by 25 basis points from 27.25% to 27.50%, 25bps lower than Cordros Research projection.
The Bank retained the Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks, and retained the Liquidity Ratio (LR) at 30% and the Asymmetric Corridor at +500/-100 basis points around the MPR.
This latest hike comes even as global economies pivot towards a more accommodative stance.
According to the CBN Governor, Yemi Cardoso, the MPC meeting was held against renewed inflationary pressure, with attendant adverse impact on income and welfare of citizens.
”Members therefore agreed to remain focused in addressing price developments,” Cardoso added.
Since the last meeting in September, inflation has taken a sharp turn upward, rising for two consecutive months due to the pronounced effects of the PMS (petrol) price surge and recent flooding in food-producing areas of the country.
Precisely, inflation rose for the second consecutive month in October, climbing by 118bps to 33.88% y/y (September: +55bps to 32.70% y/y), reversing the moderation seen in July (-80bps to 33.40% y/y) and August (-125bps to 32.15% y/y).
Notably, food inflation defied the typical relief from the harvest season, driven by sub-optimal harvest yields and elevated transportation costs, rising by 139bps to 39.16% y/y (September: 37.77% y/y).
Similarly, core inflation increased to 28.37% y/y (September: -15bps to 27.43% y/y), following a dip in the previous month, reflecting the effect of higher transportation costs and continued naira depreciation.
On a month-on-month basis, headline inflation edged higher by 12bps to 2.64% (September: 2.52% m/m).
With inflation risks firmly skewed to the upside, markets expected the MPC to implement another rate hike, just it did today, to reaffirm their commitment to price stability, anchor inflation expectations, and achieve positive real returns.
X-@theGBJournal|Facebook-the Government and Business Journal|email:gbj@govbusinessjournal.com|govandbusinessj@gmail.com
