CBN’s raises monetary policy rate to 13%, first time since 2016

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Amid rise in global inflation, the Monetary Policy Committee of the Central Bank of Nigeria has voted unanimously to raise the benchmark interest rate to 13% after two years of expansionary monetary policy.

Addressing journalists on Tuesday after the committee’s meeting at the CBN headquarters in Abuja, Godwin Emefiele, governor of the apex bank, said six out of eleven committee members voted to raise the key rate.

Emefiele said the committee also voted to retain the asymmetric corridor at +100 and -700 basis points around the MPR and liquidity ratio at 30 per cent.

The rate which had been at 11.5% since September 2020, is in a bid to spur recovery from the recession recorded due to the covid-19 has now been raised by the apex bank after the inflation rate rose above 16%.

CBN’s hawkish move is targeted at curbing the rising rate of inflation in the country, while still cautiously ensuring economic growth. This is also a massive reversal from CBN’s earlier stand that raising rates will not positively impact inflation.

“MPC also feels that not only would tightening reverse the steady improvement recorded in credit expansion, it is also of the view that tightening would not necessarily tame the inflation, particularly where the marginal decline is relatively not yet sustainable”

“While growth has continued to improve, members noted that inflation was confronted with upward pressure due to emerging risks within the domestic and external environment. The MPC, however, noted that the substantial upward push to price levels continued to be influenced by supply-side factors such as the scarcity of PMS, persisting insecurity and backlash from the Russia-Ukraine war. These require a careful and focused policy intervention to address and resolve. In this light, the MPC, urged the Bank to continue using the tools at its disposal, while increasing its collaboration with the fiscal authority to ensure that inflation is adequately reined in and growth is returned to a strong and sustainable path.”

Emefiele said the global outlook remains clouded with uncertainties over the Russia-Ukraine war and the COVID-19 pandemic.

“The sharp rise in inflation across the world as generated growing concerns among central bankers driven by rising demands and wage bills… consequently, US Fed, England and Canada have provided shift away from their policy stance,” he said.




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