*Officials Meet For Last Time Dec. 17-18
As Nigerians await the possible hike in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to curtail rising inflation and volatility in the foreign exchange market on Tuesday, 26 November, the US Fed, on the other hand saus it is considering rate cut.
Specifically, the Federal Reserve Bank of Minneapolis President Neel Kashkari said it is still appropriate to consider another interest-rate cut at the central bank’s December meeting.
“It’s still a reasonable consideration,” Kashkari said Monday on Bloomberg Television in response to a question about whether policymakers should reduce borrowing costs by a quarter point at their last meeting of the year.
“Right now, knowing what I know today, still considering a 25-basis-point cut in December — it’s a reasonable debate for us to have.”
However, some analysts say they expect Nigeria’s MPC to focus on price stability and exchange management, given the persistent upward trend in headline inflation.
They say the committee is likely to adopt a hawkish stance, opting for a rate hike to curb inflationary pressures, stabilize the Naira, and sustain investor interest in Nigeria’s fixed income securities
CBN has maintained tight monetary policy as it has been increasing policy rates in the face of inflationary pressures and a volatile exchange rate environment.
This aggressive policy stance is responsible for elevated yield in the fixed-income market that is luring investors due to the elevated yields
Infact, some of them are predicting another hike of between 25 to 50 basis points, (bps).
At its September meeting, the Committee raised the Monetary Policy Rate by 50bps to 27.25 per cent, emphasising concerns over core inflation, money supply growth, fiscal deficits, and food price pressures.
Data from FMDQ Securities Exchange Limited revealed quoted the naira at N1,678.87/$ at the Nigerian Autonomous Foreign Exchange.
Also, in the latest PMI data released by the CBN for October, the composite PMI weakened to 49.6 points from 50.5 points in September, halting two consecutive months of broad-based expansion in the business environment.
However, Fed’s Kashkari said the economy’s resilience in the face of higher interest rates suggests that the neutral rate, where policy neither weighs on nor stimulates growth, may be higher now.
That raises questions about how much monetary policy is helping to cool demand in the economy, he said.
ALSO READ:Naira, Inflation Top Agenda As CBN Holds Last MPC Meeting For 2024
The longer that resiliency continues, the more he thinks that shift might be structural and not merely temporary.
“This is what I’m trying to understand right now, is how much downward pressure are we putting on the economy, and what is the path for inflation,” Kashkari said.
Policymakers have lowered interest rates by three quarters of a percentage point in recent months, including a larger-than-usual half-point cut in September. They meet again Dec. 17-18.
Some officials have signaled support for a more gradual pace of rate reductions going forward.
Fed officials will receive more data, both on inflation and the labor market, before their December meeting. The latest update on the Fed’s preferred price gauges will be released Wednesday.
Progress on inflation, which has been inching closer to the central bank’s 2% target, has slowed in recent months.
“I have some confidence that it’s gently trending down, and right now the labor market remains strong,” Kashkari said.
Kashkari said that while one-off tariffs would likely lead to a one-time price hike, a situation where there is retaliation by foreign countries could drive up prices.
