The MPR is the rate at which commercial banks borrow from the economy and often determines the cost of funds.
In an ongoing effort to lower inflation, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) decided on Tuesday to increase both the benchmark interest rate and the MPR by 150 basis points, from 24.75 percent to 26.25 percent
The MPR is the rate at which commercial banks borrow from the economy and often determines the cost of funds.
OrderPaper recalls that the apex bank during its maiden meeting in February, raised the interest rates by a total of 7.5 per cent as manufacturers continue to groan under high cost of funds.
However, at its meeting yesterday, the bank retained the asymmetric corridor around the MPR at +100/-300 basis points, and left Cash Reserve Ratio of Deposit Money Banks, and the Liquidity Ratio unchanged at 45 percent and 30 percent respectively.
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The CBN Governor, Olayemi Cardoso, recently pledged to maintain a contractionary policy stance to combat inflation and attain price stability for as long as it takes, signalling the apex bank’s return to the orthodox monetary policy regime.
Speaking to reporters during the two-day MPC meeting in Abuja, Cardoso stated that the committee’s primary goal was to maintain price stability by efficiently utilising the monetary authority’s resources to control inflation. According to him, the MPC had to decide whether to keep tightening policy or to pause in order to assess the effects of earlier rate increases.
The CBN governor said, “Following an extensive review of risks and the near-term inflation outlook, the balance of risks suggests further tightening of policy to build on the benefits accruing from previous rate hikes.”
