MPC To Hold Rates Despite Moderating Inflation, Expert Predicts

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria is likely to hold its benchmark interest rate at its meeting slated for September 21 and 22, 2026 despite three consecutive months of moderating inflation, CardinalStone Research has said.

The prediction comes as the National Bureau of Statistics (NBS) reported continued moderation in headline inflation to 15.39 per cent year-on-year in August, from 15.43 per cent in July, in line with market expectations.

According to the NBS, the deceleration was driven by easing in the core basket to 13.29 per cent year-on-year from 14.97 per cent previously, while the food basket also tapered to 19.57 per cent from 20.31 per cent.

Month-on-month inflation moderated to 0.71 per cent in August, down from 1.57 per cent in July, largely driven by a deceleration in the food basket to 1.02 per cent compared to 5.56 per cent the prior month.

CardinalStone said the 455 basis points moderation stemmed from cooling in farm produce prices, which rose by 1.3 per cent month-on-month versus 4.7 per cent previously.

Elsewhere, core basket deflation of 0.06 per cent month-on-month, which was surprising, may have stemmed from the 2.43 per cent month-on-month naira appreciation, driven by improved FX liquidity, reflecting stronger inflows from NNPC remittances and higher monthly International Oil Company (IOC) inflows.

The firm disclosed that the outlook for September inflation is mixed. While relative naira stability should support price moderation, food prices remain vulnerable to weather-related supply disruptions.

“Below-average rainfall in key food producing areas such as Benue could weaken crop yields, particularly where planting decisions were based on historical rainfall patterns. Conversely, excessive rainfall in parts of northern Nigeria could trigger flash floods and damage crops,” it said.

The firm noted that some relief should emerge from the onset of the main harvest in late September, with supply conditions improving further into October.

However, emerging energy-related pressures are tilting inflation risks to the upside. Since August 21, Dangote Refinery has raised its PMS gantry price several times, from N1,165 per litre to N1,350 per litre as of September 12, a 15.9 per cent increase. This has pushed pump prices to between N1,395 and N1,450 per litre, depending on location.

The price adjustments reflect heightened geopolitical uncertainty in the Middle East and Brent crude prices above $100 per barrel.

Against this backdrop, CardinalStone expected headline inflation to print flat at 15.40 per cent year-on-year in September, with further energy-price volatility posing an upside risk.

On MPC outlook, the firm said members’ voting may diverge. Some may tilt toward a rate cut as inflation has moderated over the last three months and is gradually moving toward the long-run average.

Conversely, others may elect to hold rates, worried about renewed inflationary risk from rising global oil prices and election spending as campaigns have begun.

“Our expectation leans toward the latter, given the highlighted risks,” CardinalStone said.

It added that the recent 25 basis points rate hike by the US Fed and rising global yields could stoke reversal in portfolio inflows as carry trade narrows.

It added that beyond 2026, a large rate cut will likely happen from 2027 after general elections, noting inflation now sits 11 percentage points below the MPR, which it views as symbolic as CBN uses the Standing Deposit Facility (SDF) as anchor for short-term rates.