Analysts predict major rate hike as MPC meeting holds today

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MPC, CBN

Analysts at Meristem Research have projected that the newly constituted Monetary Policy Committee would hike the Monetary Policy Rate at its meeting scheduled for Monday (today) and Tuesday.

In its macroeconomics report, the analyst said that MPC will be focused on several considerations, including evaluating the disinflation trends observed in advanced economies and monitoring the measures implemented by global monetary authorities.

The MPC meeting is the first session of the year and comes several months after the last one in July 2023 during which the committee pegged the benchmark interest rate at 18.75 percent.

Meristem in its report said, “During the upcoming meeting, we anticipate that the Monetary Policy Committee will focus on several key considerations. These include evaluating the disinflation trends observed in advanced economies and monitoring the measures implemented by global monetary authorities.

“Additionally, we expect the committee to assess the deceleration in oil price fluctuations and analyse the potential repercussions of the UK and Japan’s economic downturns on global economic growth.”

On the domestic scene, the analysts said that the persistent rise in headline inflation, attributed to escalating food prices and the depreciation of the naira, continued to pose a major concern for the committee.

“Furthermore, factors such as money supply and the continuous free fall of the naira are expected to influence the committee’s deliberations.

“Considering the sustained inflationary pressures and the anticipation of a continued uptrend, we foresee the Committee raising the policy rate by 100bps to 19.75 percent.
Moreover, we anticipate an increase in the Cash Reserve Ratio by 250bps to 35.00 percent, with other policy parameters remaining unchanged.

“Additionally, considering the necessity of aligning the monetary policy rate with prevailing market interest rates, we opine that a ‘hold’ stance is unlikely.”

The country’s inflation accelerated to 29.9 percent in January, according to the National Bureau of Statistics.

However, the country’s economy grew by 3.46 percent in the fourth quarter of 2023.

The Senate on Wednesday screened the nominated members of the Monetary Policy Committee of the Central Bank of Nigeria, questioning them on the lingering foreign exchange and food crises.

President Bola Tinubu had last week forwarded to the Senate for confirmation the names of nominees to the MPC of the CBN.

On Thursday, the Senate confirmed CBN Governor, Olayemi Cardoso, as the MPC chairman.

It also confirmed CBN Deputy Governor, Muhammad Sani Abdullahi, Bala Bello, Emem Usoro, Philip Ikeazor and the Director General of the Securities and Exchange Commission, Lamido Yuguda as members of the MPC.

Others are Permanent Secretary, Ministry of Finance, Jafiya Lydia Shehu; CBN director, Murtala Sabo Sagagi; Aloysius Ordu; Aku Odukemelu; Mustapha Akinwunmi and Bamidele Amoo.