Tuesday, September 26, 2017 2:59PM / Cordros Capital
At the end of its 258th meeting (fifth this year), the Central Bank of Nigeria's (CBN) Monetary Policy Committee (MPC) voted to maintain status quo for the seventh consecutive session by retaining the:
1. Monetary Policy Rate (MPR) at 14.0%;
2. Asymmetric corridor around the MPR at +200/-500bps;
3. Cash Reserves Ratio (CRR) at 22.5%; and
4. Liquidity Ratio (LR) at 30.0%.
The Committee considered developments in the global and domestic economy since its last meeting including (1) strengthening expectation of improvement in global output growth (2) tepid global inflation momentum, (3) continued accommodative monetary policy in developed economies in support of recovery and growth, (4) the domestic economy exiting recession with a modest 0.55% GDP growth in the second quarter of the year, (5) continued drop (albeit at a slower pace) in domestic headline inflation rate in August (at 16.01% y/y) – noting the still-high food prices – with the MPC highlighting that inflation expectation remains anchored on the strength of tight monetary policy -- and (6) relative improvement in the forex space, amid continued healthy accretion to the nation's foreign reserves, and heralding stability of the average naira exchange rate across various segments of the market.
Again, the risk facing the domestic economy remains in two folds (i.e. price and output), with complementary fiscal and monetary policy remaining crucial to continued growth.
The MPC members were faced with the choices of maintaining status quo, tightening, or easing monetary policy. Amid strong arguments for the three positions, the choice to support growth without jeopardizing recent gains around prices (particularly exchange rate) culminated into a decision (6 votes to 1) of holding policy rates constant, while allowing for policy flexibility as developments unfold in the macroeconomic space.
The Committee's decision was widely expected, as shown by a Bloomberg poll wherein only two analysts out of 19 had expected a rate cut.
1. Pre-MPC Commentary - Inflation, FX Considerations Should Stay MPC Hand
2. MPC Preview: Policy Trade-Off Still Favours No Change
3. On hold on a Majority Vote Expected
4. MPC: Advocacy and The Total Eclipse of Analysis
5. Likely Split Decision At MPC, Status Quo To Be Maintained
6. Some Cracks Emerging In The Group of Eight
7. After Recession : A Need for Policy Change?