CBN MPC Divided Over Inflation Battle, Holds Key Rates

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) was divided over fixing key rates on Monday with members thorn between reining in rising inflation and sustaining growth.

However, at the end, majority of the members of the committee with the eye of keeping inflation in check while at the same time sustaining growth carried the day with the decision to keep all rates at present levels.

Governor Godwin Emefiele who announced the decisions said the MPC resolved to retain the country’s Monetary Policy Rate (MPR)  at 11.5 per cent.

Mr Emefiele also announced that the committee also decided to hold all other parameters constant.

 The Assymetric Corridor of +100 -700 basis points around  the MPR  was  retained, Cash Reserve Ratio (CRR)  retained at 27.5 per cent; and the Liquidity Ratio retained at 30 per cent.

Emefiele said that the 10 members of the committee at the meeting were divided on  policy decisions.

“Three members voted to raise MPR by 25 basis points,  one member voted to raise MPR  by 50 basis points while six members voted to hold all parameters constant, ” he said.

According to Emefiele,  the CBN MPC was of the view that increasing the rates during inflation could adversely impact on economic recovery and stifle expected investment expansion.

“Tightening would reverse the steady improvement recorded in credit expansion,  and it will not necessarily tame inflation.

“On the  other hand,  loosening will trigger further liquidity  challenge and also trigger foreign exchange demand pressure as the excess liquidity would exert demand pressure on the foreign exchange market,” he said.

He added that the committee decided to adopt a policy stance that indicates a precautionary and consistent policy stance with the prevailing economic conditions.

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