September 27, 2022/InvestmentOne Report
In the 5th MPC meeting for the year, the Committee unanimously voted to RAISE policy rate further by 150bps to 15.50% and the Cash Reserve Ratio by 500bps to a minimum of 32.50% with other policy parameters unchanged.
Other parameters retained were:
- The asymmetric corridor of +100/-700 basis points around the MPR;
- The Liquidity Ratio at 30%.
Comment: At the just concluded meeting, 10 members voted for a 150bps hike in rates, 1 voted for a 100bps hike, and 1 voted for a 50bps raise. For the cash reserve ratio, 10 members voted for a 500bps hike while 2 voted for 750bps. This aggressive hawkish move by the policy committee for the third consecutive meeting was in line with our expectations considering the continuous steep rise in inflation over the past 2 months since the last meeting was held. According to the committee, the reason for this move was predicated on the need to rein in inflationary pressures, reduce the negative real interest gap to incentivise savings and investments, and curb the lingering exchange rate pressures.
In our opinion, this is a step in the right direction as we see intensified efforts from the MPC to bulwark skyrocketing prices from a demand-pull point of view. However, with the cost-push factors left unchecked, we do not see this hawkish move having any significant effect in taming inflation in the short to medium term.
