FRI. 20 JANUARY, 2023-theGBJournal| The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is expected by analysts, to push on with more interests rate hike, with analysts, including Cordros Research analysts, projecting a further 50bps – 100bps hike.
The MPC is scheduled to hold its first meeting of the year on the 23rd and 24th of January.
”We expect the MPC to opt for smaller rate hikes in the short term, given the build-up of pressures in the local economy and as the risks of overtightening come to the forefront of policy discussions. Consequently, we expect the Committee to increase the MPR further by 50bps – 100bps and retain other policy parameters,” Cordros Research said in a note to theG&BJournal.
The remark is a widely shared view by global central bank policymakers, much of whom have signaled they will push on with more interest rate hike.
Cordros said they believe the Committee remains faced with either maintaining its hiking cycle or keeping policy parameters unchanged. Therefore, they expect the Committee to assess the domestic and global economic environment in the context of developing key economic and financial indicators since its last policy meeting in November.
”In our view, the MPC is likely to be concerned about the pressure on the domestic economy, given the slow growth recorded in Q3-22, more so that the manufacturing sector posted its first contraction since Q4-20. Moreover, inflationary pressures remain intact, although the slight ease in December will likely be welcomed among the Committee members.”
The prospect of global central banks embarking on smaller interest rate hikes could also influence the MPC’s decision to tow the same line amid concerns about the domestic economy.
Thus, it is expect the MPC to opt for smaller rate hikes in the short term, given the build-up of pressures in the local economy and as the risks of overtightening come to the forefront of policy discussions.
Meanwhile, during his speech at the 57th annual bankers’ dinner on 25 November 2022, the CBN governor signaled that the MPC would maintain its current tight monetary policy stance in the near term because of the rising inflation expectations and exchange rate pressures.
More discouragingly, headline inflation is expected to remain above the CBN’s growth-aiding threshold (12.50% y/y) in the near term, more so that election spending could add upward pressures on domestic prices.
That said, we note the pressures on domestic economic activities, partly reflecting the impact of interest rate hikes, particularly on the manufacturing sector.
”All told, we now expect the MPC to opt for smaller rate hikes in the short term, given the build-up of pressures in the local economy and as the risks of overtightening come to the forefront of policy discussions,” Cordros said.
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