Analysts expect a Further increase in interest rate

The Monetary Policy Committee of the Central Bank of Nigeria is expected to increase the Monetary Policy Rate at the conclusion of its two-day meeting today, Tuesday, according to analysts at Cordros Securities.

In its paper titled “Pre-MPC/November 2022/MPC could boost the Monetary Policy Rate Further,” it made this claim. The CBN already announced the 288th MPC meeting to be held in Abuja.

Given the continued hawkish stance of central banks around the world, a comfortable level of domestic growth, and ongoing inflationary pressures, Cordros said in its study that it now expects the MPC to raise the MPR further by 100 bps.

It was highlighted that, similar to previous sessions, the committee had to decide whether to retain the MPR at its current level or raise it further at a time when global central banks were continuing to raise interest rates despite growing risks to growth.

READ MORE: ECB plans to Increase Interest Rate to tame inflation beast

“Therefore, we anticipate the committee to evaluate the domestic and global economic environments in light of the development of important financial and economic indicators since its most recent policy meeting in September”, according to the research. Considering that there hasn’t been a substantial shock to the economy since the last meeting, we believe that Q3-22 saw the economy continue on its path of steady expansion.

In light of the foregoing, we think the committee will be motivated to continue fighting against the persistently high inflationary pressures, especially since a persistently negative real interest rate could stifle domestic investment and jeopardize the stability of the local currency.

“Moreover, the more hawkish rendition from global central banks also supports the committee towing the same path to reduce external pressures. Thus, we think a further tightening of the policy rate is necessary to re-anchor inflation expectations which an econometric study by the CBN shows is the most significant driver of actual inflation in Nigeria, according to one of the committee members.”

It added that “Consequently, we think a further interest rate hike is likely at the meeting. Accordingly, we expect the committee to raise the MPR by an additional 100bps.”