The CBN governor Olayemi Cardoso, affirmed that the current spate of monetary policy tightening measures by the CBN would not be long drawn and would be relaxed once there were substantial improvements in the economy in terms of inflation and exchange rate.
This was disclosed in his press briefing after the second Monetary Policy Committee meeting for the year in Abuja on Tuesday, according to The Punch.
According to the CBN governor, the committee does not anticipate a long overdue tightening of interest rates and as reforms being implemented take effect, there will be an easing in MPR.
He said, “While the increase in interest rate may have tendencies toward strangulating the economy, with the foreign exchange rate coming down, that also helps to moderate it overall.
“And as I said earlier, you would expect that this would not be too long drawn; at least I would hope so. We are getting towards a situation where the exchange rate is moderating, and we are expecting it to moderate and then it finds a level that, quite frankly, is sustainable. This would involve huge collaboration with the fiscal side because a lot of that cannot just rely on the monetary side alone.”
The CBN boss explained that the considerations of the committee at the meeting focused on the current inflationary pressures and the need to anchor inflation expectations and also maintain exchange rate stability.
“These considerations underscore the importance of the CBN’s commitment to the price stability mandate and the need to urgently bring inflation under control to ensure that the purchasing power of ordinary Nigerians is restored in the short to medium term,” he said.
Cardoso said the MPC noted the increase in food inflation from 35.41 per cent to 37.9 per cent as part of the consideration of the committee for reviewing the interest rate.
He said “From our perspective, the key thing is to be fully focused on our core mandate to fight inflation and stabilise the economy. The purchasing power of the average person should be restored to the level it should be.”
Explaining the reasons for the increase, the former Lagos State Commissioner for Finance explained that the Monetary Policy Committee was faced with the choice of proceeding with its tightening cycle or holding to take account of the impact of the previous increase in interest rates and the adjustment of the cash reserve requirement.
He added that to meet its price stability mandate, the Monetary Policy Committee adopted a tightening of the economy based on macroeconomic data and market analysis.
He however affirmed that the economy would be stabilised by the end of the year.
“Things should moderate from May and the inflation rate should come down by the end of the year,” he stated.
