MPC: CBN Raises Benchmark Interest Rate By 25 Basis Points

The Central Bank of Nigeria (CBN) has once again raised the Monetary Policy Rate (MPR) by 25 basis points, from 18.50 percent to 18.75 percent.

Ag. Governor, Folashodun Shonubi announced the development shortly after the MPC meeting on Tuesday in Abuja.

Shonubi said, the Committee’s decision in favour of a moderate rate hike was to sustain efforts at anchoring inflation expectations, narrow the negative real interest rate gap, and improve investor confidence.

He said, the Committee’s considerations focused on the persistent rise in inflation
and its potential adverse effect on output growth and household income.

He said, the continued uptick in inflation (month on month), driven by increase in both the food and core components of the CPI, in the view of members, remained a key challenge.

According to him, “the members also expressed concerns that the recent policy decisions around subsidy removal, exchange rate liberalization and disbursement of palliatives, would have pass-through effects to inflation.

“Members therefore, called for decisive measures, by the Bank, to address the likely liquidity surfeit from these developments, including using appropriate monetary policy instruments”, he said.

The Ag. apex bank governor disclosed that Six (6) Members voted to raise the MPR: Four (4) Members by 25 basis points and two (2) Members by 50 basis points. Five (5) Members voted to hold the MPR constant. All Members voted to narrow the asymmetric corridor from +100/-700 to +100/-300 basis points around the MPR.

At the end, he said, the MPC voted to: Raise the MPR by 25 basis points, from 18.50 to 18.75 per cent; Adjust the asymmetric corridor to +100/-300 basis points around the MPR; Retain the CRR at 32.5 per cent; and Retain the Liquidity Ratio at 30 per cent.

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