May 28, 2020/Cordros Report
The Monetary Policy Committee (MPC), faced with the choice of reducing or leaving policy parameters unchanged – unanimously elected to reduce the benchmark interest rate. Notably, seven members voted to cut rate by 100bps, two members voted for a 150bps rate cut, while one member elected for a 200bps rate cut.
- Monetary Policy Rate (MPR) at 12.5%;
- 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 and (2) Dovish global central banks’ responses to the COVID-19
- On the domestic front, the Committee noted (1) sustained inflationary pressure (April: +8bps to 12.34% y/y), (2) weaker but still positive output growth in Q1-20, and (3) and sustained decline in manufacturing PMI.
- Our key takeaway is that the committee acknowledged that growth will slide into the negative territory in Q2-20. However, in a bid to avoid an economic recession over 2020, the MPC elected to support an already dovish policy landscape with a 100bps rate cut.
