BREAKING: CBN increases MPR to 26.25%, retains other parameters
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) after its two-day meeting in Abuja on Tuesday raised Monetary Policy Rate (MPR) by 150bassis to 26.25 per cent from previously 24.75 per cent.
MPR is the baseline interest rate in an economy, which banks use to set their interest rates.
The committee retain the asymmetric corridor at +100basis /-300basis points and retain Cash Reserve Requirement at 45 per cent and retain liquidity rate at 30per cent.
MPR opened this year at 18.75 per cent and committee members have sustained increase in the MPR amid increasing inflation rate and scarcity of foreign exchange.
Analysts had predicted an increase in CBN’s interest rate to 25.75 per cent and uphold other parameters as the apex bank sustained its pressure in tackling double-digit inflation rate and foreign exchange crisis.
The Governor, CBN, Dr. Yemi Cardoso recently stated that the current spate of monetary policy tightening measures by the apex bank will not be long drawn and will be relaxed once there are substantial improvements in the economy in terms of inflation and exchange rate.
According to him, the committee does not expect a long-drawn interest rate tightening and as the reforms being implemented take effect, there will be relaxation in MPR.
Analysts at Cordros Research said, “Despite the moderation in price increases evidenced in the decline in month-on-month inflation numbers for April, we anticipate a further tightening of the monetary policy rate.”
“Nevertheless, we anticipate a less hawkish stance primarily due to the slowdown in the pace of inflation and Debt Management Office (DMO)’s reluctance to take interest rates significantly higher in the fixed-income market, given its impact on the Federal Government’s debt burden.
“Accordingly, we anticipate the MPC to raise the MPR by 100 basis points to 25.75per cent while holding other parameters constant,” they disclosed in a latest report,” they added.
At the last MPC in March, the members voted to raise the MPR from 22.75 per cent to 24.75 per cent; adjust the Asymmetric Corridor to +100/-300 basis points around the MPR; retain the CRR at 45.0 per cent; adjust the CRR for Merchant Banks from 10.0 per cent to 14.0 per cent; and retain the Liquidity Ratio at 30 per cent.
