The upcoming MPC meeting ( 23rd – 24th May 2016) is very crucial in light of the current macroeconomic economic headwinds confronting the nation, such as galloping inflation, slowing growth and widening disparity between the official exchange rate and parallel market rate.
The Committee’s deliberations are likely to be skewed towards addressing the current challenges with inflation which is already at a six year high of 13.7%, and other short term inflationary threats in the economy. To this end, we envisage that the Committee’s members may vote to tighten monetary policy further via a 100 basis points increase in MPR as well upward adjustment to the CRR (Cash Reserve Ratio). This will of course raise questions as to the appropriateness of such a decision in a period of waning economic growth.
Similarly, we expect the Committee to also address the inadequacies in the nation’s FX market by unveiling its comprehensive FX guideline it mentioned at its last meeting. We see this as been germane as the current faulty FX structure is the bane of the current inflationary pressures been faced in the economy. Thus, solving the nation’s FX imbroglio is a sine qua nom in attaining CBN price stability objective as well as attracting foreign capital needed to support the nation’s economic growth.
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