The Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) is expected to keep the Monetary Policy Rate (MPR), the rate at which the central bank lends to banks, stable today in spite of the rise in inflation.
This is because it will seek to preserve a positive real rate regime. Real rate is the rate of interest an investor expects to receive after allowing for inflation.
Razia Khan, Head of Research, Africa Global Research, Standard Chartered Bank, London told LEADERSHIP that prices are still benign in spite of the consecutive rise in inflation in March and April.
“Looking through the detail of the Consumer Price Index (CPI) report it looks as though price increases were benign across most categories. Despite the higher on the base effect, there is little sign of significant inflationary pressure and therefore little need for any imminent tightening, we think”, she said.
She however said the currency would continue to be important for the overall inflation outlook, and in the very recent past analysts have seen what may possibly be temporary pressures on the back of the euro area crisis, but nothing more significant than that, and nothing to bring about a move towards an early tightening.
“Investors are therefore becoming more comfortable with the view that this could be the peak in the cycle, and are looking to lock in higher yields as a result. We saw this with the bond auctions this week. She however said. “we expect to hear a word of caution about the inflation outlook, with year-on-year (y/y) inflation still likely to move higher, she said.
Bismarck Rewane, chief executive officer of Financial Derivatives Company (FDC) Limited is also of the view that the recent hike in inflation is not enough to compel the MPC to raise benchmark rate.
He told LEADERSHIP in a telephone interview that the inflation rate is almost reaching a crescendo, and that soon, it will begin to decelerate.