The Monetary Policy Committee (MPC) met on January 20 and 21, 2014 against the backdrop of uncertainties in the global economy, especially arising from the commencement of the QE3 tapering by the Fed. In attendance were eight (8) out of the ten (10) members following the retirement of Mr. Tunde Lemo, Deputy Governor, on January 11, 2014 and Mr. John Oshilaja, an external member of the MPC, who completed his term on December 31, 2013.

The Committee reviewed key global and domestic economic developments in 2013 and re-assessed the short- to medium-term risks to inflation, domestic output and financial stability and the outlook for 2014.

International Economic Developments

The global economy is expected to continue recovering from the global financial crisis, as growth is projected to accelerate in 2014. The International Monetary Fund (IMF) projected global growth at 3.4 and 3.5 per cent in 2014 and 2015, respectively, up from 2.4 per cent in 2013. Some other sources, however, have produced less optimistic projections of global growth for 2014; for example, the United Nations Department for Economic and Social Affairs? (UNDESA) has projected 3 per cent growth. The decision by the US Federal Reserve to reduce its monthly asset purchases from USD85 billion to USD75 billion left most markets stable having already priced-in the development. The quantitative easing measures by the US Federal Reserve had helped to restore momentum to the US economy and also contributed to the improvement of the Eurozone economy in 2013.

Europe is forecast to return to growth in 2014 after two years of contraction. Greece, which has been at the centre of the Bloc’s banking and debt crisis, is expected to record its first economic expansion in six years. Emerging markets that were major beneficiaries of cheap money from the Fed stimulus could experience financial market instability as tapering begins, although the US authorities have made it clear that they remain sensitive to the impact of their domestic policies on global markets and will therefore aim to minimise disruptions.

Global inflation is projected to rise to 2.71 per cent in 2014, up from about 2.30 per cent in 2013. Favorable developments in food and fuel supply would moderate upward pressure on prices of major commodities, despite the expected acceleration in global activity. The US recorded inflation of 1.5 per cent in December, up from 1.2 per cent
in November, 2013.

Source: CBN