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First MPC meeting: Cordros analysts optimistic of rates retention

Godwin Emefiele, CBN Governor

By Chinyere Joel-Nwokeoma

Lagos, Jan. 22, 2021

Ahead of the first apex bank Monetary Policy Committee (MPC) meeting, analysts at Cordros Research have expressed optimism that the committee would vote for rates retention.

The News Agency of Nigeria (NAN) reports that the MPC is expected to hold its first meetings of the year on Jan. 25 and Jan. 26.

Recall that the MPC, at its last meeting in November 2020, had decided by a unanimous vote to retain all parameters.

This was done towards reversing the recession and achieving medium term macroeconomic stability.

The MPC, at the meeting, had voted to retain the Monetary Policy Rate (MPR) at 11.5 per cent.

It retained the asymmetric corridor of +100/-700 basis points around the MPR.

The committee also retained the Cash Reserve Ratio at 27.5 per cent and the Liquidity Ratio at 30 per cent.

Cordros Research, in its pre-MPC report released on Friday, predicted that the committee would again keep policy rates unchanged.

The report said the committee would affirm use of unorthodox measures such as Cash Reserve Requirement debits, Loan-to-Deposit Ratio and direct intervention in employment-stimulating sectors to influence macroeconomic outcomes and ultimately attain macroeconomic stability.

“We also expect the committee to reiterate its resolve to keep yields at low levels in the near term to compel deposit money banks to boost private sector credit, while also easing deficit financing pressures at a time when revenue from oil and non-oil sources are pressured.

“We expect the committee to assess the developments in the domestic and external macroeconomic and financial markets since its last meeting in November and provide guidance on the path of monetary policy in 2021,” read the report in part.

The report added that economic recovery would likely be prolonged due to rise in new COVID-19 cases.

“On the domestic front, we believe the recent rise in new COVID-19 cases will be on the front burner given the potential to unwind gains from fiscal and monetary stimulus since the reopening of the economy in May 2020,” it read.

The report indicated that mounting inflationary pressures had also intensified since the last MPC meeting in November.

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