WED, SEPT 20 2023-theGBJournal |The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is expected to hold its penultimate meeting of the year on the 25th and 26th of September.
Although the voting patterns and CBN’s tone from the last meeting suggest that the Committee might be tempted to keep rates steady at this meeting, but Cordros research analysts think the dynamics have changed as inflationary pressures have intensified, given the lagging impact of the current administration’s reforms.
According cordros, the core inflation (+67bps to 21.15% y/y) settling at a record high also implies that demand-side factors are stoking price pressures as much as supply-side factors, thus providing further reason to maintain a tight monetary policy stance.
Notably, they spotlight the expansion in monetary aggregates, with the broad money supply increasing by 25.5% year-to-date (as of the end of July).
Thus, Cordros believe the MPC will continue to use a combination of interest rate increases and liquidity tightening to anchor medium-term inflation expectations, more so that price pressures remain biased to the upside over the rest of the year.
Conclusively, the baseline expectation is for the MPC to raise the MPR further by 25bps, remove the N2 billion limit on the Standing Deposit Facility (SDF), and retain other policy parameters.
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