THE Central Bank of Nigeria (CBN) has for the third consecutive time kept the benchmark interest rate unchanged at 27.5 per cent despite a moderation in headline inflation.
The CBN governor, Olayemi Cardoso, announced this at the end of a two-day Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, July 22.
According to Cardoso, the 12-member committee unanimously decided to maintain the benchmark interest rate at 27.5 per cent and all other parameters.
The committee retained the asymmetric corridor around the MPR at + 500/-100 basis points, cash reserve ratio (CRR) of deposit money banks at 50 per cent, merchant banks at 16 per cent, and liquidity ratio at 30 per cent.
The bimonthly MPC meeting is used by the CBN to review recent financial development and economic output.
Cardoso said that the committee’s decision to retain all parameters was based on the need to sustain the momentum of disinflation and sufficiently maintain price pressure.
“Maintaining the current policy stance will continue to address the existing and emerging inflationary pressure.
“The MPC will continue to undertake rigorous assessment of economic conditions, price development and outlook to inform future policy decisions,” he said.
The CBN governor said that in its consideration, the committee acknowledged the decline in headline inflation in June, the third consecutive month of deceleration.
He explained that the committee also considered that the ease in inflation in June was largely driven by the moderation in energy prices and stability in the foreign exchange market.
“Despite these positive developments, members observed the uptick in month-on-month headline inflation, suggesting the persistence of underlying price pressures.
“The continued global uncertainties associated with tariff wars and geopolitical tensions could further exacerbate supply chain destruction and exert pressures on the prices of imported items,” Cardoso added.
The ICIR reported that the committee retained the benchmark interest rate in February as well as in May.
A benchmark interest rate is the official rate that guides financial institutions on the proper cost of funds and lending businesses, including micro, small, and medium enterprises.
Some analysts had expected a cut in the benchmark interest rate following the trend in domestic and global inflation rates.
A renowned economist, Bismarck Rewane, had anticipated a likely 25 basis points cut.
His assumption was based on the increasing rate of global inflation relative to the declining inflation rate in Nigeria, which he said was an obvious sign for the CBN to cut interest rates.