CBN Interest Rate Hike Fails Experts’ Projections

The Central Bank of Nigeria, CBN, has raised the  Monetary Policy Rate, MPR, to 27.25 percent.

Yemi Cardoso, the apex bank governor announced this on Tuesday during its Monetary Policy Committee, MPC meeting in Abuja, the nation’s capital.

The decision to raise the bench mark interest rate by 50 basic points however contradicted earlier prediction, by financial analysts, that the government-controlled bank would maintain last month’s rate of 26.75 percent.

Bloomberg, for instance, had in  a report last week said the CBN was not likely to raise the rate further citing the recent fall in inflation in the country.

According to the United States of America, USA based media company, Nigeria’s inflation rate has fallen to a six-month low in August, making a new hike in the rate almost  unnecessary.

Speaking on Tuesday, Cardoso stated that the decision to further hike the MPR was necessary to boost confidence in the economy, aside from assisting economic agents to plan for both the medium and long term basis, noting that the apex bank will continue to make efforts to control inflation in the country.

Cardoso stated that despite the fact that headline inflation trended downwards due to a moderation in food inflation, core inflation has remained elevated, driven primarily by rising energy prices.”

“The uptrend poses severe concerns to members as it clearly indicates the persistence of inflationary pressures. Members thus reiterated the need to work in close collaboration with the fiscal authority to address the current upward pressure on energy prices.

“The MPC noted the continued growth in money supply, recognising the need to curtail excess liquidity in the system as well as address foreign exchange demand pressures.”