Sustained Inflation Decline Informed MPR Reduction to 26.50% — Cardoso
The Central Bank of Nigeria (CBN) says its decision to reduce the Monetary Policy Rate (MPR) by 50 basis points was partly informed by sustained deceleration in year-on-year inflation.
The CBN Governor, Yemi Cardoso, said this on Tuesday in Abuja while presenting the communiqué from the 304th meeting of the Monetary Policy Committee (MPC).
The MPC reduced the MPR by 50 basis points to 26.50 per cent from 27 per cent. The committee also retained the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and 16 per cent for merchant banks.
The Liquidity Ratio was retained at 30 per cent, while the Standing Facilities Corridor was maintained at +50/-450 basis points around the MPR.
According to Cardoso, in reaching the decision, the committee considered the sustained deceleration in year-on-year headline inflation in January, marking the 11th consecutive month of decline.
“This downward trajectory in inflation was driven mainly by the continued effects of contractionary monetary policy, stability in the foreign exchange market, robust capital inflows, and improvement in the balance of payments.
“The momentum was further reinforced by relative stability in the prices of petroleum products and improved food supply conditions, especially staples. “These outcomes have indicated that prior tightening has continued to anchor expectations,” he said.
Cardoso added that the MPC took note of the remarkable performance of Nigeria’s external sector, evidenced by robust accretion to foreign exchange reserves, supported by higher export earnings and increased remittance inflows.
According to him, this has contributed to greater stability in the foreign exchange market and bolstered investor confidence.
He said the MPC also welcomed the newly issued Presidential Executive Order 09, which redirected oil and gas revenues into the federation account.
“The committee acknowledged the potential impact of this order in improving fiscal revenue and accretion to reserves.
“Given these improved macroeconomic conditions, the committee believed that a moderate easing was consistent with the prevailing inflation dynamics.
“Members acknowledged the continued resilience of the banking sector, with most key financial soundness indicators remaining within regulatory thresholds,” Cardoso said. #Sustained Inflation Decline Informed MPR Reduction to 26.50% — Cardoso#
