Nigeria raises interest rate to tame galloping inflation

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CBN Governor Yemi Cardoso announced this during a press briefing following a two-day Monetary Policy Committee (MPC) meeting held on Monday and Tuesday.

Central bank governor Olayemi Cardoso stated that the bank’s MPC was confronted with the choice of either raising or maintaining rates while monitoring the effects of prior increases. However, it chose to increase rates in favour of promoting price stability.

According to him, the committee also voted to retain the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks and adjust the CRR of merchant banks from 10 per cent to 14 per cent.

Analysts had largely anticipated another rate hike due to the persistent surge in inflation and the considerable volatility of the local currency, the naira.

A surge in electricity tariffs, removal of fuel subsidies, and a depreciation of over 27% in the naira over the past month are exacerbating inflationary pressures. In April, inflation surged to a 28-year high of 33.69% year-on-year.

This marks the third rate hike this year, following increases of 200 basis points in March and 400 basis points in February. The bank’s MPC is scheduled to convene for its next rate-setting meeting in July.

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