July 19, 2022/InvestmentOne Update
In the 4th MPC meeting for the year, the Committee unanimously voted to RAISE policy rate by another 100bps to 14.00% with other policy parameters unchanged.
Other parameters retained were:
- The asymmetric corridor of +100/-700 basis points around the MPR;
- The CRR at 27.50%; and
- The Liquidity Ratio at 30%.
Comment: At the just concluded meeting, 1 member voted for a 150bps hike in rates, 6 voted for a 100bps hike, 1 voted for a raise of 75bps and 3 voted for a 50bps raise. Unlike other meetings where the CBN adopts a Wait and See approach after a policy decision, this is the second consecutive time the Apex Bank will be taking a hawkish policy stance after raising rates by 150bps at the last meeting in May 2022.
While we expected a hold status-quo stance given the fact that the last aggressive hike of 150bps is yet to permeate the economy as seen in recent economic data, particularly with respect to inflation. We opine that the decision of the MPC was predicated on the need to clamp down on the persistent elevated inflationary pressures witnessed in the past five consecutive months and exchange rate pressures due to capital outflows stemming from policy normalisation in global economies. Imperatively, we highlight that the monetary authorities seem to be toeing the aggressive policy tightening path of other Central Banks across globe with a strong determination to fight rising price pressures and its attendant effect on the overall performance of the economy.
