CBN hikes Monetary Policy Rate to 15.5% for third consecutive time

The Monetary Policy Committee (MPC) of the CBN increased Monetary Policy Rate (MPR) from 14 per cent to 15.5 per cent on Tuesday to tame inflation.

The committee had increased the MPR by a total of 250 basis points at its last two meetings.

The MPR is the baseline interest rate in an economy; every other interest rate used within that economy is built on it.

CBN Governor, Mr Godwin Emefiele, announced the new rate after the September bi-monthly MPC meeting in Abuja, on Tuesday, September 27.

This is the third consecutive hike of the MPR, the benchmark interest rate for the country’s financial market in 2022.

The MPC also raised Cash Reserve Ratio to 32.5 per cent from 27.5 per cent while holding other parameters constant.

The Asymmetric Corridor, thus, remains at +100/-700 basis points around the MPR, and the Liquidity Ratio remains at 30 per cent.

Asymmetric interest rate corridor is a new tool developed to increase the flexibility of monetary policy.

It provides the ability to make timely responses to external finance or risk sentiment shocks through active management of daily open market operations.

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“The MPC noted with concern the continued aggressive movement in inflation, even after the rate hike at its meeting in May and July.

“It expressed its unrelenting resolve to restore price stability while providing the necessary support to strengthen the fragile recovery,” Emefiele said.

Some experts had earlier projected that the CBN would increase the rates to rein in inflation.

Prof. Umhe Uwaleke, an economist, had said the MPC would increase the MPR again, by at least, 50 basis points.

Uwaleke, a Professor of Capital Market at Nasarawa State University, said that his projection was informed by rising inflation.

“Aside inflationary pressure and the need to tame it, the MPC would be considering current global monetary developments such as the hike in policy rates by central banks in developed countries.

“For example, the U.S. Federal Reserve recently increased the benchmark rate by 75 basis points, while the Bank of England increased by 50 basis points,’’ he had said.