MPC leaves rates unchanged despite clear concerns about coronavirus pandemic

CBN Governor during a briefing on the MPC meeting
CBN Governor, Godwin Emefiele


As the coronavirus pandemic spree troubles nations’ economy, the Monetary Policy Committee (MPC), faced with the choice of reducing or leaving policy parameters unchanged, on Tuesday unanimously elected to maintain the status quo by keeping all monetary policy metrics at current levels.

The committee, after its normal two days meeting kept the Monetary Policy Rate (MPR) at 13.5 per cent and the Asymmetric corridor around the MPR at +200/-500bps.

The Cash Reserves Ratio (CRR) and Liquidity Ratio (LR) were maintained at 27.5 per cent and 30.0 per cent respectively.

According to the committee, it considered developments in the global and domestic economy since its last meeting which included the negative impact of COVID-19 on global growth, Dovish global central banks’ responses to the COVID-19, and rapid pace of decline in global oil prices.

On the domestic front, the committee noted sustained inflationary pressure (February: +7bps to 12.20% y/y), weaker oil earnings due to lower oil prices, and recent volatility in the FX market amid declining external reserves.

Cordros Securities analysts stated that its key takeaway from the MPC status que is that the committee appeared to have lost faith in the effectiveness of a rate cut in tackling economic growth-related problems. “Rather, it expressed its confidence in utilizing other expansionary toolkits to limit the impact of COVID-19 on economic activities.”

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