Analysts expect no policy change as MPC meets

FINANCE and economic analysts from Lagos-based Afrinvest (West) Africa Limited have said that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) would maintain status-quo on benchmark interest rate also known as the Monetary Policy Rate (MPR) at its meeting brought forward to July 18th and 19th 2022.

Specifically, the analysts said it is worthy to note that despite the increase in MPR in May 2022, the hike failed to have an immediate impact on inflation due to weak and delayed transmission mechanism of monetary policy.

“That said, we believe the MPC would maintain status-quo on MPR at its next meeting brought forward to July 18th and 19th.

“Despite domestic price and FX pressure and the strong possibility of a sharper interest rate hike by the US Feds in July, our hold-steady outlook is premised on the expectation that the committee would prefer to give more time to assess the impact of the last policy change (+150bps hike in May) on price dynamics (at least till September),” the analysts stated in a note to clients.

While  Afrinvest (West) Africa expects a hold-steady outlook, it holds the view that the MPC should adjust the asymmetric corridor to support the transmission impact of the MPR on financial system liquidity and domestic inflation.

For experts at Cowry Assets Management Limited, global macro-economic stability is now under threat from inflation which is no longer Nigeria’s specific phenomenon.

“Thus, the policy changes in responding to it would have substantial repercussions across emerging and frontier market economies.

“However, we see the acceleration in the inflation numbers in June offering policymakers limited room to manoeuvre rates at the next meeting on July 18 and 19, though a marginal rate tweak is inevitable. Thus, we project July inflation to further accelerate to 18.90 per cent,” the Cowry Assets experts noted.

Nigeria’s monetary policy committee would announce its latest interest-rate decision on July 19. At its last meeting in May, the committee raised the cost of borrowing for the first time in almost six years.

Nigeria’s inflation rate jumped to the highest level since January 2017.

MPC member, Festus Adenikinju, said at the time that the committee’s 150-basis-point hike was unlikely to rein in inflation and policy makers should be “overly aggressive” in reining in price growth.

CBN governor, Godwin Emefiele, said at the same meeting that a steep acceleration in inflation was detrimental to economic growth and needs to be contained.

The biggest drivers of inflation were the prices of gas, bread and cereal products.

Annual food-price growth rose to 20.6 per cent from 19.5 per cent in May and core inflation, which strips out the cost of food and energy, quickened to 15.7 per cent in June, compared with 14.8 per cent in the prior month.