Analysts expect MPC to raise lending rate

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Analysts at Cordros Securities have predicted that the Monetary Policy Committee of the Central Bank of Nigeria will raise the Monetary Policy Rate at the end of its two-day meeting today, Tuesday.

It stated this in its report on ‘Pre-MPC/November 2022/MPC could increase the Monetary Policy Rate further’.

The CBN had earlier announced it 288th MPC meeting in Abuja.

 “On a balance of factors, we now expect the MPC to raise the MPR further by 100bps, given the continued hawkish rendition of global central banks amid a comfortable level of domestic growth and persistent inflationary pressures,” Cordros stated in its research.

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It noted that as in prior meetings, the committee was faced with the decision of holding or hiking the MPR further at a time global central banks were marching on with their interest rate hiking cycle despite the increasing risks to growth.

The research said, “Therefore, we expect the committee to assess the domestic and global economic environment in the context of developing key economic and financial indicators since its last policy meeting in September. In our view, the absence of a significant shock to economic activities since the previous meeting will provide respite that the economy likely maintained its steady growth path in Q3-22.

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“Thus, we believe the preceding will give the committee a reason to maintain its fight against the stubbornly-high inflationary pressures, more so that a continued negative real interest rate could dampen domestic investments and undermine the local currency’s stability.

“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.”

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