United Capital says expectation of rate cut by Nigeria’s MPC waning
By Olumidagreaton June 28, 2018
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Given the dramatic improvements recorded across key macro variables earlier in the year, the expectation of a growth stimulating rate cut by the Nigerian Monetary Policy Committee (MPC) was only a matter of “when and by how much.”
However, recent events in the domestic and global space are moderating such expectations.
While inflation has continued to moderate in the last 5-months in 2018, the recent May inflation number showed renewed pressure on m/m inflation rate, suggesting that the high base effect which had largely supported successive moderation in headline inflation rate is fizzling out.
Furthermore, disruption to food production amid clashes between farmers and herders, and the likelihood of an increased political spending in the second half of 2018, is set to pressure year-end inflation higher.
Lastly, rising yields in the developed markets like U.S, are mounting a considerable amount of pressure on emerging and frontier market assets amid massive capital flow reversal, highlighting the need for caution on the part of the MPC.
Base on the foregoing, the expectation of a July 2018 rate cut by the MPC now seems less certain, more than ever.
This is with a view to containing further pressure on Inflation and retaining foreign capital in the local economy.