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HomeTop NewsCBN hikes interest rate by 50bps to 18% to curb inflation

CBN hikes interest rate by 50bps to 18% to curb inflation

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By Oludare Mayowa

The Central Bank of Nigeria (CBN) rate-setting committee on Tuesday raised its benchmark Monetary Policy Rate (MPR), to 18 percent from the previous 17.5 percent.

The increase in the benchmark interest rate was anchored on the need to curb the surging inflationary trend and support the value of the local currency.

Nigeria’s inflation rate rose to 21.9 percent in February, according to the latest data from the National Bureau of Statistics (NBS) in the face of cash crunch necessitated by the effect of the CBN currency reform policy.

The monetary policy rate (MPR) is the baseline interest rate in an economy, upon which all other interest rates in the financial system is anchored.

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The CBN Governor, Godwin Emefiele, told Journalists at the end of the two-day MPC meeting in Abuja that the committee voted to keep the asymmetric corridor at +100 and -500 basis points around the MPR.

Godwin Emefiele said members of the Monetary Policy Committee were unanimous in raising rates, citing price and exchange rate pressures and expectations of a removal of a petrol subsidy.

“These, in view of members, provided a compelling argument for an upward adjustment of policy rates, albeit less aggressively,” Emefiele said.

Analysts at United Capital Plc had on Tuesday projected that “we expect the MPC to retain the MPR at 17.5 percent. Our stance emanates from the viewpoint that a “retain decision” by the MPC may revitalize the depressed economy.

“Similarly, we believe the MPC needs a little more time to examine the impacts of prior hikes on the economy in order to prevent the “over-tightening” of the economy. Conversely, the MPC may decide to increase the MPR by 50 bps to reinforce its objective of curbing demand-pull inflation.

“Aside from that, policymakers may decide to align with the current trend of interest rate hikes, as evidenced in some developing and advanced economies. However, the consensus expectation is that rate hikes will begin to moderate in Q2 2023.”

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