Abuja, July 26, 2023: The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), on Monday raised the country’s Monetary Policy Rate (MPR) from 18.5 per cent to 18.75 per cent.
The Acting Governor of the CBN, Mr Folashodun Shonubi made this known on Tuesday, while presenting the communique from the MPC meeting.
The MPR is the baseline interest rate upon which which other interest rates are built.
Shonubi announced that the committee also adjusted the asymmetric corridor from from +100/-700 to to +100/-300 basis points around the MPR, retained the Cash Reserve Ratio (CRR) at 32.5 per cent; and retained the Liquidity Ratio at 30 per cent.
According to Shonubi, the committee is confronted with only two policy options, to hold or marginally hike the policy rate to offset the moderate increase in headline inflation.
“Considering the option to a hold, the committee reviewed the impact of the continued rise in inflation on various macroeconomic variables, noting the potential dampening effect on output growth.
“Members agreed unanimously that the previous series of rate hikes had indeed greatly moderated the pace of price development and was gradually but steadily yielding the expected outcome.
“The option to continue to hike the policy rate, albeit moderately, also presents a strong alternative,” he said.
He said that this was premised on the expected liquidity injections into the economy, from the recent policy developments and the likely impact on inflation.
“The committee remained cautious in arriving at a policy decision as members noted the need to continue to support investment which will ultimately lead to the recovery of output growth.
“The balance of these arguments thus, leaned in favour of a moderate rate hike, to sustain efforts at anchoring inflation expectation, narrow the negative real interest rate gap, and improve investor confidence.
“The MPC, thus, resolved by a majority vote to raise the Monetary Policy Rate (MPR) by 25 basis points. Six members voted to raise MPR by 25 basis points while five members voted to hold the MPR Constant.
“All members, however, voted to narrow the asymmetric corridor from +100/-700 to +100/-300 around the MPR,” he said.
