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Economist, Rewane sees increased interest rate as inflation soars

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A renowned economist, Bismarck Rewane has projected that the Central Bank of Nigeria (CBN) monetarists would likely raise the benchmark interest rate in its May meeting due to rapid growth in inflation.

In a statement posted on his company’s Twitter account, Financial Derivatives Company (FDC) on Monday, Rewane also projected that inflation is likely to rise this month and in May as well.

He said the Monetary Policy Committee (MPC) has long held onto its accommodative policy stance, “but this is likely to change as inflation shows no sign of slowing down.

“MPC getting backed into a corner Headline inflation is likely to rise this month and in May as well. The MPC has long held onto its accommodative policy stance but this is likely to change as inflation shows no sign of slowing down.

“The MPC was divided at its meeting in March, with 4/10 members voting for a rate hike. The MPC could decide to hold interest rates steady again this month in hopes of an unlikely but possible reversal in inflation, but the committee is widely expected to raise rates in May,” he wrote on the company’s Twitter handle.

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In an economic bulletin by the FDC, the company said; ” Based on our time series analysis and survey of major markets in Lagos Metropolis, official headline inflation is projected to rise again by
0.13 per cent to 15.83 per cent.

“This brings Nigerian inflation in tandem with global and regional trends. For example, US inflation climbed to a 40-year high of 7.9 per cent while inflation in the UK soared to 6.2 per cent.”

According to the report, “The Nigerian MPC will meet again next month to decide on the monetary
policy direction. Based on the current economic realities, the committee will most likely raise rates
by 50bps to 12.5 per cent pa.

“At its meeting in March, the MPC was more divided on policy direction than it has been in a long while. Four of the 10 members voted in favour of a rate hike, with 3 voting for a 25bps hike and 1 voting for a 50bps hike.

“This means that Nigerian policy makers are becoming more aware of the risk posed by inflation,” the FDC said.

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