‘Inflation will drop in 2022’ — CBN holds interest rate at 11.5%, other parameters constant

The monetary policy committee of the Central Bank of Nigeria (CBN) has voted to retain the monetary policy rate (MPR), which measures interest rate, at 11.5 percent.

The monetary policy rate (MPR) is the baseline interest rate in an economy, every other interest rate used within an economy is built on the MPR.

Addressing journalists on Tuesday after the committee’s first meeting for the year at the CBN headquarters in Abuja, Godwin Emefiele, governor of the apex bank, said the committee members unanimously retained key rates.

He said the committee voted to maintain the key lending rate at 11.5 percent, with the asymmetric corridor of +100 and -700 basis points around the MPR and liquidity ratio at 30 percent.

Throughout 2021, the committee also held MPR constant.

“The MPC feels a hold will signal its realisation of the fragility of the growth recovery and its sensitivity to emerging global and domestic uncertainties. Hence, the need to sustain policy trajectory,” Emefiele said.

“After a careful balancing of the benefits and downsides of each policy ratio, the MPC decided to hold all policy parameters constant.”

He said the committee believed that the existing monetary policy stance has supported the growth recovery and should be allowed to continue for a little longer for consolidation to achieve the MPC mandate of price stability that is conducive for sustainable growth.

The committee also felt that a hold stance would enable it to carefully appraise the implications of the unfolding global development around policy tapering and normalisation by advanced economies.

They observed that inflation in most developed and emerging economies remain high, driven by persistent exchange rate fluctuations and supply bottlenecks.

The committee noted that the increase in the country’s inflation rate in December 2021 is attributable to increased demand during the yuletide, suggesting that the uptick in the numbers could be a temporary development.

In December 2021, surging food prices push inflation to 15.63 percent — the first increase after 8 months of decline.

According to Emefiele, the members are of the view that inflation will moderate further going into the new year, driven by the significant interventions in the agricultural sector.

The CBN MPC highlighted that the Nigerian economy is expected to continue with positive growth following the impressive growth recorded in the third quarter of 2021, reflecting continuous recovery from the recession.