MPC Will Do Nothing, Policy Rate Hike Expected in H2
The monetary policy authority will do nothing at the end of its meeting today, Atlass Portfolios Limited told MarketForces Africa this morning. In a discussion with MarketForces Africa, analyst Olaide Baanu expects a rate hike in the second half of 2022 to stem capital outflow.
The Central Bank (CBN) policy committee meeting that started yesterday is expected to end today amidst the consensus that the monetary authority will not challenge status quo.
However, the firm sees possible rates adjustment in the second half of 2022 amidst a twice fast and furious Federal Reserve hawkish plan for the year.
What would happen to emerging/frontier market if Fed raises interest rate twice in 2022 amidst its bond-buying tempering? Some analysts believe this will force emerging/frontier markets to adjust rates upward.
Of course, frontier markets have raised rates to combat rising inflation rates across the sphere but a fresh rates hike is cooking.
Responding to an inquiry about its expectation for 2022, Atlass Portfolios Limited analysts Olaide Baanu said based on the December 2021 Inflation rate figure of 15.63%.
It was noted that the uptick in the headline inflation rate in Nigeria was driven by consumer spending in the festive season. Though festive spending dipped compared with the previous year record due to tightening in household finances.
Atlass Portfolios analyst Baanu said the firm expects the January 2022 inflation rate to come down lower than the December 2021 rate to about 15.4% while the base year effect continues to have a downtrend impact on the rate.
“With this, we expect the monetary policy rate (MPR) to remain at the current rate of 11.5% as the MPC continue to monitor the fragile economy and the global market sentiment”.
He added that with the current uptrend of inflation in the global economies, the MPC may tighten the MPR to about 12.5% in the second half of 2022 to sustain the foreign investors’ confidence and increase capital inflow.
In 2021, the benchmark interest rate was sustained, though a downward adjustment to 11.50% started in September 2020 following a 100 basis points cut from 12.5%.
#MPC Will Do Nothing, Policy Rate Hike Expected in H2
Read: MPC Will Keep Policy Rates to Drive GDP Rebound Further
