By Dipo Olowookere
The Central Bank of Nigeria (CBN) is projected to push the Monetary Policy Rate (MPR), also referred to as the benchmark interest rate to 27.25 per cent from 26.75 per cent at its Monetary Policy Committee (MPC) meeting ending today, Tuesday, September 24, 2024, analysts at Meristem Research have said.
The MPC meeting of the central bank commenced yesterday in Abuja and the Governor of the bank, Mr Yemi Cardoso, should address the media this afternoon on the outcome of their deliberations.
The monetary policy authority had earlier embarked on a series of rate tightening as a result of the stubborn inflation, which rose to its highest level in 28 years in June 2024 at 34.19 per cent.
However, it cooled to 33.40 per cent in July and further eased to 32.15 per cent in August 2024 due to an improvement in food supply influenced by the harvest season.
At its last meeting, the CBN slightly hiked the interest rate to 26.75 per cent.
Meristem Research said in a note obtained by Business Post that these key rates should be raised by the MPC this time around at its fifth meeting of the year.
“At this meeting, we expect the MPC to consider several key factors, including disinflationary trends in advanced economies, the recent 50bps rate cut by the US Federal Reserve, global economic growth patterns, the recent decline in oil prices, and the possible repercussions of these developments on Nigeria’s economy,” a part of the report stated.
“We expect the committee to consider the anticipated stability in food prices, which could affect inflation in the near term, along with the need to address rising borrowing costs while carefully monitoring capital inflows into the economy.
“As a result, we anticipate that the MPC will opt for a rate hold while maintaining other parameters to effectively meet these objectives and maintain economic stability,” the firm further stated.
The note stressed that the recent hike in the price of premium motor spirit (PMS), otherwise known as petrol, may not push the central bank to significantly hike the rate despite its expected effect on inflation.
It said this would be offset by “the steady foreign reserves and successful domestic dollar-denominated bond issuance ($900 million),” which indicates the CBN’s capacity to provide sufficient liquidity to the exchange rate market in the short term, supporting the MPC’s exchange rate management objective.