CBN’s MPC may reduce rates this month by 50bps – Rewane

The Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) may reduce its Monetary Policy Rate (MPR) when they meet this month in response to the receding inflation rates, said, Bismarck Rewane, Chief Operating Officer (COO) of Financial Derivatives (FDC) Limited.


He also hinted that, there might real Gross Domestic Product (GDP) growth may slow down in the third quarter of this year.
According to him, “the continued moderation in inflation and the surge in the second quarter GDP growth (5.01%) albeit due to base year effects will increase the probability of empowering the doves in the MPC to fight for a reduction in the MPR as a complement to the stimulus of the fiscal authorities to sustain the growth trajectory”.


However, indicators are pointing towards real GDP growth tapering in the third quarter. The Stanbic PMI reading, which is a forward-looking indicator fell by 5.78 per cent to 52.2 points in August. If inflation also reverses its downward trend in September due to persistent currency pressures, the MPC may be put on the spot and will have to make a hard choice, said Rewane in it FDC publication released yesterday.


“Based on our market survey and regression, headline inflation is projected to moderate further to 16.8 per cent in August from its current level of 17.38 per cent”, said Rewane. The easing of inflationary pressures is likely to be partially due to price resistance by income weary consumers and increased supply of food commodities as a result of the harvest season.