The Central Bank’s Monetary Policy Committee (MPC) is poised to reassess its stance on interest rates as its two-day meeting commences today. With inflation rates decreasing for two consecutive months, analysts suggest the MPC may reduce lending rates marginally. The current interest rate stands at 26.75%, a rate many consider unsustainable for businesses.
Experts like Mr. Charles Sanni, Managing Director of Cowry Treasurers, and Professor Richard Mayungbe of Copperstone University, Zambia, advocate for lowering interest rates. They argue that the current rate is an “overkill” and hampers industries’ ability to expand and create jobs.
Others, like Teslim Shitta-Bey, Chief Economist at Proshare, and Olaid Baanu, a financial analyst, predict the MPC may retain the current interest rate or increase it by 25 basis points to combat inflation, still high at 32.15%. The MPC has consistently increased interest rates since February, despite the country’s inflation rate hitting a 28-year high of 34.19% in June.
Key Factors Influencing the MPC’s Decision:
- Inflation Rate: Decreased to 32.15% in August from 33.40% in July
- Interest Rate: Current rate of 26.75% considered unsustainable for businesses
- Purchasing Managers Index: Fell below 50 points, potentially pressuring rates downward
- Security Issues: Agricultural sector concerns may impact monetary policy decisions
The outcome of the MPC meeting will determine the direction of monetary policy for the short to medium term.
