CBN Hikes Benchmark Interest Rate to 17.5%
As inflation fighting gets dirty, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) at its first meeting of the year has raised the benchmark interest rate by 100 basis points to 17.50%.
In 2022, the monetary authority increase the policy rate by 500 basis points, pushing the interest rate to 16.50% at the year-end. The CBN hawkish returned in a fast and furious manner after its pro-growth stance that lasted for two years.
The monetary policy committee again decided to make the interest rate expensive after noting that inflation reduced to 21.34% in December 2022. Though, the reduction in the consumer price index that measures inflation rate movement was attributed to base effects, according to market analysts’ consensus.
In its first policy meeting in 2023, the CBN committee retain the asymmetric corridor of +100/-700 basis points around the monetary policy rate (MPR) and retain the cash reserve ratio (CRR) at 32.5 per cent. The liquidity ratio is maintained at 30 per cent, according to the CBN statement.
The meeting noted that the continued hawkish disposition reflects the view that an over 21.0% inflation is already hurting growth and that the latest 15bps moderation in CPI reading is hardly something to celebrate, particularly given the continued surge in month-on-month inflationary readings.
In addition, the committee highlighted rising election-related spending, persistent scarcity of PMS, and naira weaknesses as indicators of further growth-inhibiting inflationary worries down the line.
Overall, to curb inflation in 2022, the apex bank policy committee has now raised the benchmark interest rate by 600 basis points, from 11.50% in May 2022 to 17.50% in January 2023.#CBN Hikes Benchmark Interest Rate to 17.5%