CBN retains 12% interest rate

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has once again decided to maintain the current policy stance, by retaining the Monetary Policy Rate (MPR) at 12 per cent with a corridor of +/- 200 basis points around the midpoint.

Addressing reporters in Abuja yesterday at the end of the its meeting, the Governor of the CBN, Sanusi Lamido Sanusi, said the committee also decided to retain the Cash Reserve Ratio (CRR) at 12.0 per cent and the Liquidity Ratio at 30 per cent.

He explained that the Committee was faced with three choices: namely increase in rates in response to the up tick in headline and food inflation; a reduction in rates in view of declining core inflation and Gross Domestic Growth (GDP), and retaining current monetary policy stance in view of conflicting price signals and global uncertainties.

He said: “The Committee considered and rejected option one, as being potentially pro-cyclical considering the structural nature of recent inflationary pressures. While acknowledging the merit of the arguments in favour of option two. It was also rejected as likely to send wrong signals of a premature termination of an appropriately tight monetary stance.”

The Committee resolved to retain the MPR which determines the rate at which banks lend to their customers, he added.

The Committee decried the conflicting price signals coming from the latest inflation numbers from the National Bureau of Statistics, with headline and food inflation trending upwards, while core inflation rate continued to moderate for the fourth consecutive month.

This development according to the Committee, “has created uncertainty as to the appropriate policy stance at this time. However, since the factors underpinning the inflationary pressures were mainly structural, a monetary response may not be appropriate at this time,” Sanusi stated.