MPC to hold next week amidst possible hike in inflation rate

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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is expected to hold between September 23 and 24 in Abuja amidst possible increase in inflation rate in August

The MPC of this month will be the fourth meeting the committee this year, our correspondent can report.

The members of the committee in the second meeting voted to reduce Monetary Policy Rate (MPR) from 14 per cent to 13.5 per cent; retain the Cash Reserve requirement (CRR) at 22.5 per cent and retain the Liquidity Ratio at 30per cent.

At the last MPC, the CBN governor, Mr. Godwin Emefiele, explained that the development was a decision of the 11 members of the committee that were in attendance at the meeting who voted unanimously for retention for the progress and development of the economy.

Emefiele said in considering specific policy options of whether to loosen, tighten or hold, the committee ensured that it focused and considered that the growth of the economy was imperative and the management of price stability was sacrosanct.

He disclosed that after evaluating the consequences of loosening or tightening options, the committee decided to hold on its monetary policy’s position.

According to him, tightening policy is not an option at this time, while loosening will increase money supply and stimulate aggregate demand as domestic production and economy will be awashed with liquidity.

The governor added that holding on to current monetary policy’s position, the committee observed that the recent action of the management of the bank targeted at stimulating credit growth in the real sector would increase credit delivery to the real sector.

He said holding on to its monetary policy would also accelerate development and economic growth in the country.

The CBN governor said that another reason was that interest rates were currently trending downward and it was safer to await the full impact of this policy action on the economy before reviewing its position.

Emefiele said that the MPC also called on the banks to encourage Nigerians in diaspora to use official sources for remittance of funds.

He said the committee advised the banks to introduce incentives by reducing charges on diaspora home remittances to Nigeria.

Meanwhile, analyst at Financial Derivatives Company Limited (FDC) has said inflation rate for month of August sets to inflect upward by 0.07 per cent to 11.15 per cent.

The National Bureau of Statistics (NBS) had announced 11.08 per cent inflation rate for July. FDC latest report, said a few skeptical analysts were of the view that the declining trend of inflation was too good to be true.

According to FDC report, “The new projection from our inflation survey seems to confirm the saying that “if it is too good to be true, then it must be true”.

“We are estimating a marginal increase in both headline and monthly inflation in August. The headline inflation is expected to inch up by 0.07per cent to 11.15per cent while the monthly inflation is projected to rise by 0.10per cent to 1.11per cent (14.15per cent annualized).

“The trend of falling inflation is being bucked for a number of reasons including the partial closure of the land borders which led to temporary food shortages especially turkey, chicken and rice.

”The impact of this was a spike in the prices of these food items. The price of a 50kg bag of rice increased by almost 30% to N18,000 in August from N14,000 in July. It however curtailed smuggling of petrol and diesel, thus creating excess supply and driving down prices. The wholesale price of diesel fell by 3.15per cent to N215/liter.

“Other inflation stoking factors that had hitherto been benign are now becoming potent. These include, adjustments in the exchange rate for computing custom duty to N326/$, forex restriction for dairy products and general food imports. Nigeria’s annual food imports is estimated at $3.9billion.”

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