MPC: Experts predict unchanged rates, rise in inflation
Financial and economic experts have said the Monetary Policy Committee of the Central Bank of Nigeria will likely leave the Monetary Policy Rate, also known as the benchmark interest rate, unchanged at the end of its two-day meeting today (Tuesday).
The Chief Executive Officer, Financial Derivatives Company Limited, Bismarck Rewane, said consumers must prepare for rising inflation from August.
Rewane, in an interview on a Channels TV programme, ‘Sunrise’, said there were predictions that Nigeria would be a high inflation environment in 2019.
The National Bureau of Statistics, in its June 2018 Consumer Price Index and Inflation Report, which was released on Monday, stated that inflation rate slowed to 11.23 per cent year-on-year in June but increased month-on-month to 1.24 per cent from 1.09 per cent in May.
Rewane said, “The consumers have to prepare themselves. We are going into a planting season, minimum wage negotiation, and budgetary spending; we have to prepare ourselves for an increase in inflation after 17 months of consecutive decline. Inflation is set to start increasing from next month. There is no question about that; that is the likely outcome.
“The MPC will be concerned that if they do anything about interest rates now, they might actually just trigger inflation as the International Monetary Fund has warned sternly that any push or attempt to lower interest rates could trigger inflationary pressures.”
Nigerian inflation at a 17-month year low is unlikely to move the CBN to start easing rates this week, Bloomberg reported on Monday.
It said the MPC, which held its key rate at 14 per cent for two years to curb inflation and help support the currency in the country, would continue to hold the MPR constant.
The Managing Director, Blackbit Limited, Wale Ajibade, in a telephone interview with our correspondent, stated that although the inflation rate had looked good over the last 17 months, any reduction in the MPR might not be sustainable over the next six months, considering the forthcoming elections.
“My suggestion is that they hold it constant and watch the economy. Once we have a 24-month stability, then it can be reduced,” Ajibade said.
He added that the MPC ought to pay attention to other forms of financial inclusion and financial technology.
According to him, the last regulation by the CBN on the USSD transfers is likely to have a negative effect on financial inclusion in the country.
Analysts at FBNQuest Capital said in an emailed note on Monday that they anticipated an unchanged stance by the MPC towards the rates.
They stated that the committee’s principal fears were that the expansionary fiscal policy would undermine macroeconomic stability and that in line with trends in selected emerging markets such as Argentina and Turkey.