This was revealed by CBN Governor Olayemi Cardoso in remarks to the media following the two-day Monetary Policy Committee (MPC) meeting that took place in Abuja.After rises of 150 basis points in May, 200 basis points in March, and 400 basis points in February, the Monetary Policy Rate saw an increase of 50 basis points (bps) to 27.65% from 26.25 percent. This is the fourth rate increase of the year.
The interest rate that the CBN uses to lend to banks, which then lend to clients at variable rates, is known as the benchmark interest rate, or MPR (monetary policy rate).
Additionally, from +100 to -300 basis points to +500 to -100 basis points, the central bank changed the asymmetric corridor surrounding the MPR.
According to Mr. Cardoso, the committee decided to keep commercial banks’ Cash Reserve Ratios (CRR) at 45% and to raise merchant banks’ CRR to 14%.
The committee decided to keep the liquidity ratio at thirty percent as well.
“The committee expressed its resolve to take essential actions to bring inflation under control, keeping in mind the impact that rising prices have on businesses and households.
“It reiterated its dedication to the banks’ price stability mandate and maintained its optimistic outlook that prices will moderate in the near future, even with the headline inflation spike in June 2024.”
According to the bank chief, this depends on monetary policy becoming more popular in addition to recent actions taken by the fiscal authority to combat food inflation.
He claims that the committee took note of the ongoing food inflation that threatens price stability during its deliberations.
In addition, he attributed the increased pressure to the pervasive insecurity in regions that produce food and the high expense of transporting agricultural goods.
Recently, Mr. Cardoso emphasized the necessity of keeping rates high in order to reduce the possibility of hyperinflation and its effects.
He stated: “That will be as long as we can control and reverse galloping inflation” in reference to the length of rate hikes. We’ll keep the rates the same after we’ve accomplished that. We are well aware that rate hikes were imposed and sustained for a very long period in the Western world in order to contain inflation. They have not yet begun to lower the rates, but they have just lately ceased raising them.
“It’s critical that we tighten and hold on for a short while. We will be able to reduce the rate hikes in the not too distant future.”
Experts caution against increasing the rate any more because they believe it may have unintended consequences for firms.
