Monetary Policy Committee: Economists Predict Rates Retention Due to Global, Local Uncertainties

Economists have expressed optimism that the Monetary Policy Committee of the Central Bank of Nigeria would retain the benchmark lending rate due to uncertainties in the global and domestic environment. They stated this in various interviews with the News Agency of Nigeria in Lagos on Monday, on expectations from 262nd MPC meeting currently holding in Abuja on July 23rd and July 24th.

They told NAN that the MPC would leave the policy parameters unchanged due to uncertainties in the global and domestic economic environment. Prof. Uche Uwaleke, Head of Banking and Finance Department, Nasarawa State University Keffi, said the MPC would still leave the policy parameters unchanged due to economic uncertainties.

“Although inflation rate is trending down, the MPC will be more concerned about the risk of reversing the gains already achieved in the forex market if monetary policy is eased,” Uwaleke said. He said another major consideration by MPC would be the fiscal injections that would accompany the implementation of the 2018 budget.

“Furthermore, the hike in interest rate in the US, uncertainties over Brexit negotiations and the US-China trade war and its likely impact on global demand will all be factored in,” Uwaleke added. Also speaking, Prof. Sheriffdeen Tella of the Department of Economics, Olabisi Onabanjo University Ago-Iwoye, Ogun said there was a likelihood of rate retention.

“The fear of spending via 2018 budget implementation and by politicians to start political mobilisation towards 2019 elections should make the MPC to be careful in cutting rates,” Tella said. He said the interest hike in the US that was causing capital outflow noticed currently in the Capital Market could make the committee to raise the interest. Tella, however, said raising the interest rate was not going to benefit the economy in the short to medium term as cheap credit was required to continue to grow the economy.

“This is a situation an earlier passage of the budget would have helped to prevent or resolve quickly but this was not so. “The MPC cannot afford to tamper seriously with the rates either way for now,” he said.

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