MPC gives reasons for retains CBN controlling monetary rates at 13.5 Percent among others

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In the just concluded Monetary Policy Committee (MPC) meeting on Tuesday July 23, 2019, the following were the resolution far reached by the Monetary Policy Committee Members;

Monetary Policy Rate was retained at 13.5%

Cash Reverse Ratio Was retained at 22.5%

Liquidity Ratio Was retained at 30.0%

Asymmetric window was retained within the corridor of+200 and -500 basis points around the MPR.

 

The Monetary Policy Committee (MPC) of Nigeria’s apex bank, the Central Bank of Nigeria (CBN) retained all keys indicators during its 268th meeting held in Abuja is an indication that the committee remain focus on issues relevant to economy growth & stability

CBN Governor, Mr Godwin Emefiele made this known while addressing newsmen on outcome of the MPC meeting in Abuja on Tuesday.

Emefiele said the committee also retained Cash Reserve Ratio (CRR) at 22.5 per cent as well as Liquidity Ratio at 30 per cent.

He explained that the development was a decision of the 11 members of the committee that were in attendance at the meeting who voted unanimously for retention for the progress and development of the economy.

CBN Governor said in considering specific policy options of whether to loosen, tighten or hold, the committee ensured that it focused and considered that the growth of the economy was imperative and the management of price stability was sacrosanct.

Though reactions are continued to trickle in as regards the outcome of the meeting though AmehNews gathered information from some analysts that the CBN would leave the policy rates unchanged.

Amehnews recall that the 267th MPC meeting which was held in May, 2019 saw the apex bank retaining the Monetary Policy Rate at 13.50 per cent; asymmetric corridor at +200/-500 basis points (bps) around the MPR; the Cash Reserve Ratio (CRR) at 22.5 per cent and the Liquidity Ratio at 30 per cent.

However, some analysts noted that from recent trends in the macro-economic space may have inform this decision; prominent among them include the current disinflation stance of the economy, where headline inflation rate moderated to 11.2 percent Year on Year (Y-o-Y) in June 2019 from 11.4 percent in the corresponding month of May of the same year.

For instance, Afrinvest, a leading independent investment banking firm with a focus on West Africa, said that “In the upcoming meeting of the MPC of the CBN between July 22nd and 23rd 2019, we expect rates to be kept at current levels but the tone of members to support monetary easing.

” We note that monetary easing is already on course in the debt market as the MPR is only symbolic. We expect the CBN to continue to ease by guiding yields downward through its less aggressive liquidity management operations.”

Although Nigeria’s external position has not been cheerful evidenced by the negative balance of trade (trade deficits) followed by a reduction in remittances as well as sustained weakness in the income and services account, the sustained disinflation witnessed in the economy supports the monetary easing.

Corroborating, Cordros Capital Limited, a leading financial services group in African Markets with a reputation for wealth creation, noted that the status quo will be maintained by the MPC owing to their interest in maintaining price stability in addition to the sizeable Open Market Operations (OMO) bills which would mature in the fourth quarter (Q4) of 2019.

“Although the domestic economic environment appears to support a rate cut with inflation currently below the 12.00 percent level, a level above which the committee believes growth will become pressured, we believe that the committee will remain cautious and focus on its overarching aim of keeping price levels stable,” Cordros explained.

 

“The CBN should further drop interest rates so that people can have access to cheap funds.”

The CBN Governor, Godwin Emefiele, who in line with his five-year strategic plan, had directed Deposit Money Banks (DMBs) to set aside 60 percent of their deposits for lending to the real sector (globally adjudged the engine of any thriving economy) come September 2019.

Gives and takes, from the 268th MPC meeting, the third in this year, which ended today, Tuesday July 23, 2019, maintaining existing monetary policy stance amidst improvements in the easing talks seem as a possible development.


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