AS the Monetary Policy Committee (MPC) meeting holds today, September 23, 2024, analysts are expecting no major changes in interest rate and other key parameters in the economy.
This anticipation is based on the MPC’s previous decisions and current economic conditions.
The CBN announced that its 297th Monetary Policy Committee meeting will be held on September 23 and 24, 2024. The two-day event is scheduled for the bank’s headquarters in Abuja.
Analysts from Afrinvest (West) Africa Limited observed that despite the present state of the economy, the MPC is likely to weigh their decision against emerging risk to domestic prices from the energy sector and flood-related disruptions.
Therefore, “we opine that a rate cut would be premature. On the flip side, additional hikes should be off the card due to cost to consumption and production activities, including government borrowings.
“On the back of these, we forecast a hold decision next (this) week, to allow the MPC evaluate the evolution of macroeconomic dynamics and measure risks appropriately.”
Following this, and given Debt Management Office (DMO’s) front loading of government borrowings in first half (H1), Afrinvest anticipate a short-term bullish trend to persist in the fixed income space, albeit softer, leading to cautious rotation into the equities market.
Similarly, Cowry Assets Management Limited Research notes a favorable downward shift in both headline and food inflation trends, signaling a significant change in the inflation trajectory.
The moderation is driven by the CBN’s aggressive monetary policy, with interest rates now elevated to 26.75 percent, coupled with government measures aimed at stabilising food prices.
Although challenges like the removal of fuel subsidies and continued naira depreciation have exerted inflationary pressure, strategic policy interventions have helped to mitigate some of the adverse effects. Looking ahead, the analysts said inflation is projected to ease further in September to 30.95 percent, as increased food supply from the ongoing harvest season is expected to relieve some of the economic strain caused by rising prices.
At the Monetary Policy Committee meeting this week, it is expected that given the progress of the recent efforts at taming inflation, the committee may adopt a wait-and-see approach, to monitor price developments closely and evaluate the full effect of previous rate hikes on the economy.
This cautious stance will allow the committee to assess whether further tightening is necessary or if the current policy trajectory is sufficient to maintain price stability.
The CBN announced that its 297th Monetary Policy Committee meeting will be held on September 23 and 24, 2024. The two-day event is scheduled for the bank’s headquarters in Abuja.
According to a statement from the apex bank, the meeting will focus on reviewing the country’s economic and financial conditions and determining the appropriate monetary policy direction for the short to medium term.
The MPC is meeting against the backdrop of cooling global inflation, informing rate cuts in Advanced markets (ECB: -SObps, BoE:-25bps, US Feds: -5Obps, 2024 cumulative rate cut).
Similarly across SSA, Egypt (held at 27.25%), South Africa (cut by 25bps to 8.0%) and Ghana (held at 29.0% after 100bps cut in January) have shifted to relatively relaxed interest rate postures, following decline in inflation numbers. On the domestic front, inflation rate broke a 19-month streak, moderating two consecutive months since July, while GDP growth accelerated in Q2 by 3.19% y/y (Q1: 2.98% y/y), led by the Services sector (3.79%y/y).
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