September 24, 2025/Coronation Report

Summary
The Monetary Policy Committee (MPC) held its 302nd meeting on 22nd –23rd September 2025, with all 12 members in attendance. The Committee unanimously voted to reduce the Monetary Policy Rate (MPR) by 50bps to 27.00% (from 27.50%), marking the first policy rate cut after a prolonged tightening cycle. This decision reflects their confidence in the current disinflationary trend observed over the past five months being sustained especially after month-to-month inflation also showed a disinflationary trend for the first time.

Committee’s Rationale
The MPC highlighted improved macroeconomic stability, evidenced by:

➢ Inflation: Headline inflation slowed to 20.12% y/y in August 2025, the sharpest moderation in five months, aided by FX stability, capital inflows, a surplus current account balance, and stable PMS prices.

➢ External Sector: Gross official reserves strengthened to US$43.05bn (11 September 2025), providing 8.3 months of import cover.

➢ GDP Growth: Output momentum firmed, with real GDP expanding by 4.23% y/y in Q2 2025 (vs. 3.13% in Q1), supported by higher crude oil production and resilient non-oil activity.

➢ Liquidity Conditions: The MPC highlighted elevated liquidity levels in the banking system, largely from
fiscal injections on the back of stronger government revenue.

The MPC further underscored the importance of sustained FX market stability in anchoring inflation expectations and called for continued policies to deepen FX liquidity and attract capital inflows. The Committee noted that excess liquidity in the banking system, largely driven by fiscal injections from improved revenue, poses risks to macro stability. The narrowing of the asymmetric corridor was therefore aimed at boosting interbank activity and improving policy transmission.

Financial Sector Assessment

• Resilience: The banking sector remains sound, with key financial indicators within prudential thresholds.
• Recapitalization: Significant progress recorded; 14 banks have met the new capital requirements. The MPC urged continuation of the exercise to safeguard financial stability.

• Forbearance: The recent termination of waivers on single obligor limits breaches has improved transparency and long-term risk management. The Committee assured that the transitory impact does not threaten system stability.

Outlook
The MPC reaffirmed its commitment to data-driven monetary policy, with a focus on sustaining disinflation while supporting output recovery. Although inflationary pressures continue to ease, the Committee remains cautious of risks emanating from excess liquidity, seasonal demand boosts associated with the festive period, and external vulnerabilities.

We expect a mild downward adjustment in yields across the curve in the near term, with stronger compression at the short end. The long end is likely to remain sticky, capped by fiscal funding pressures. Market participants will continue to price in the credibility of the disinflation path and the sustainability of FX stability.

The next meeting of the MPC is scheduled for 24–25 November 2025. 

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