March 24, 2020/Cordros Update
The Monetary Policy Committee (MPC), faced with the choice of reducing or leaving policy parameters unchanged – unanimously elected to maintain the status quo by keeping all monetary policy metrics at current levels.
- Monetary Policy Rate (MPR) at 13.5%;
- Asymmetric corridor around the MPR at +200/-500bps;
- Cash Reserves Ratio (CRR) at 27.5%; and
- Liquidity Ratio (LR) at 30.0%.
- The Committee considered developments in the global and domestic economy since its last meeting including (1) the negative impact of COVID-19 on global growth, (2) Dovish global central banks’ responses to the COVID-19, and (3) rapid pace of decline in global oil prices.
- On the domestic front, the Committee noted (1) sustained inflationary pressure (February: +7bps to 12.20% y/y), (2) weaker oil earnings due to lower oil prices, and (3) recent volatility in the FX market amid declining external reserves.
- Our key takeaway is that the committee appeared to have lost faith in the effectiveness of a rate cut in tackling economic growth-related problems. Rather, it expressed its confidence in utilizing other expansionary toolkits to limit the impact of COVID-19 on economic activities.
