By Ihechi Enyinnaya
The Central Bank’s Monetary Policy Committee on Tuesday hiked the monetary policy rate (MPR) to 14 per cent, barely two months after it was raised to 13 per cent by the body.
Godwin Emefiele, the CBN governor made the announcement after the 286th meeting of the MPC. He said the adjustment was needed to defray the effects of rising inflation.
According to him, it was the right option considering economic realities.
He said: “The committee resolved that the most rational policy option would be to further strengthen its tightening stance in order to effectively curtail the unabated rising trend of inflation,” Emefiele said.
“Members were conscious of the fact that output growth remained fragile. However, not curtailing inflation now could erode the monetary gains achieved in improving consumer purchasing power and thus worsen the poverty level for the vulnerable populace.”
The monetary policy rate (MPR) is the main interest rate in a country or economy on which all other interest rates in that economy are based.
While the apex bank increased the MPR rate, it, however, retained other parameters.
The asymmetric corridor remains +100 and -700 basis points around the MPR, and the well as Cash Reserved Ratio (CRR) at 27 percent.
He added, “Committee thus vote unanimously to raise the Monetary Policy Rate (MPR). One member voted to increase the MPR by 150 basis points, six members by 100 basis points, one member by 75 basis points and three members by 50 basis points.
“Consequently, Committee resolved to increase the MPR by 100 basis points from 13 percent to 14 percent. In summary, MPC voted as follows:
“Increase MPR to 14% from 13, retain the Asymmetric Corridor at +100 and -700 basis points around the MPR, retain the CRR at 27.5 percent and retain liquidity ratio at 30 percent.”
Tuesday’s rate hike marks the second time, the MPC will raise the interest rate in two months.
The MPC increased the rate from 11.5 percent to 13 percent on May 24.
Nigeria’s inflation surged to an 11-month high in May, standing at 17.71 per cent, according to the report from the Nigerian Bureau of Statistics.
MPR is the baseline interest rate in an economy from where every other interest rate used within the economy derives.
The financial regulator had frozen the MPR at 11.5 per cent for two and a half years before the May 24 increment.