MPC: Analysts favour unchanged rates on anticipated public sector spending

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8 years ago

Analysts and investment bankers over the weekend reached a consensus in different notes that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), holding its meeting today in Abuja, will retain the benchmark interest rate, at 14 per cent.

The MPC is scheduled to meet on Monday and Tuesday, September 25 and 26 respectively.

Experts at Cowry Assets Management Limited said the retention of Monetary Policy Rate (MPR) despite sustained moderations in inflation rate, increase in global crude oil prices and the recent exit from economic recession is partly due to anticipated increase in public sector spending and the need to ensure positive real returns on investments in order to attract foreign portfolio inflows.

For Financial Derivatives Company (FDC) Limited, the MPC is likely to have split decision on keeping rates unchanged.

In its September 22 Economic Bulletin, FDC noted that as the Monetary Policy Committee meets, the financial and business community will be waiting with bated breath for the outcome of one of the most important and symbolic meetings of the committee in recent times.

This according to FDC analysts is because it is happening at a time when political and populist considerations will overshadow the policy and economic imperatives.

“The most likely outcome is a split decision and a compromise around the maintenance of the status quo with fringe adjustments to the Cash Reserve Ratio (CRR) and the width of the asymmetric corridor.

Analysts at Vetiva Capital Management believe that in the light of recent yield declines in fixed income market, the bearish inflation outlook “may prove a snag to MPC easing intention at upcoming meeting.” Also, Afrinvest Research and Investment Company is of the view that though the improvement in external sector variables and little growth of non-oil sector may impose a temptation for policy easing, yet, “MPC would maintain status quo this week given the need to consolidate gains on stabilizing FX and inflation rates.”