CBN Hikes Interest Rate by 150 Basis Points to 26.25%
The Central Bank of Nigeria (CBN) has increased the benchmark interest rate by 150 basis points to consolidate its inflation fight. After a 2-day monetary policy meeting, the CBN further ramped up tightening measures to rein in inflation. The consumer price index climbed to 33.69% in April after the interest rate was raised by 6% in the first quarter of 2024.
Yemi Cardoso, the Governor of CBN, announced the adjustment in the policy rate while reading the communique, added that the committee decided to hold all other parameters constant. The Cash Reserve Ratio (CRR) was thus, retained at 45 per cent, the Liquidity Ratio of 30 per cent was retained and the Asymmetric Corridor of +100/-300 basis points around the MPR was also retained.
Cardoso said that all 12 members of the committee were present at the meeting. According to him, the key focus of the committee at the meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation. He said that members observed that while year-on-year headline inflation in April rose moderately, the month-on-month measures of headline, food, and core inflation all declined significantly.
“This follows a decline month-on-month of headline and food measures in March, suggesting that the recent tight monetary policy stance of the CBN is beginning to yield the desired outcome,” he said. He said that the MPC, however, noted that inflationary pressure continues to be driven largely by food inflation. “The committee, thus, reiterated several challenges confronting the effective moderation of food inflation.
“They include rising cost of transportation of farm produce, infrastructure related constraints along the distribution network, and security challenges in some food producing areas,” he said. Cardoso said that “exchange rate pass-through” to domestic prices for imported food items was also an impediment to taming food inflation.
According to him, the MPC urged that more be done to improve the security of farming communities to guarantee improved food production in these areas,” he said. #CBN Hikes Interest Rate by 150 Basis Points to 26.25% Reforms: Fitch Revises Nigeria’s Outlook to Positive
