LAGOS – An optimistic inflation trajectory outlook, supported by the naira appreciation developments in the foreign exchange market, would determine future MPC’s potential rate cut at the May policy meeting,analysts have said.

They advocated the need for the Central Bank of Nigeria (CBN) to adopt a more flexible and predictable foreign exchange management model to regain the confidence of foreign investors.

Besides, they maintained that while a potential rate cut could be considered at the May policy meeting, there is an urgent need for a measured approach aimed at balancing exchange rate stability with the anticipated disinflationary process.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) unanimously voted to hold the Monetary Policy Rate (MPR) constant at 27.50% (Previous: 27.50%) at the February meeting (first meeting of the year), marking the first pause in rate increases since May 2022.

The Committee’s decision to hold rates was primarily driven by an optimistic inflation outlook, supported by the naira appreciation and the steady reduction in fuel prices.

The Committee also voted to keep all other parameters unchanged – Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) and Merchants Banks at 50.0% and 16.0%, respectively; asymmetric corridor around the MPR at +500bps/-100bps and the liquidity ratio at 30.0%.

https://independent.ng/mpc-rate-cut-in-may-hinges-on-stable-fx-market-inflation-trajectory-analysts/