CBN rate hiking cycle to end this week: Capital Economics
The rate hiking cycle that the Central Bank of Nigeria started last year is expected to end this week, according to London-based Capital Economics.
The Monetary Policy Committee of the CBN is due to meet on Monday and Tuesday.
“It is likely to be a close call, but we think the Central Bank of Nigeria will end its rate hiking cycle and keep rates on hold at 26.25% on Tuesday,” David Omojomolo, Africa economist at Capital Economics, said in a note.
He pointed out that at the last MPC meeting in late May, policymakers delivered a large 150-basis-point hike.
“But Governor Cardoso struck a confident tone that monetary tightening was ‘beginning to yield the desired outcomes’. Since then, inflation data has taken the shine off a bit, with inflation accelerating in June to 34.2% and, crucially, the month-on-month rate ticking up for the first time in four months. Meanwhile, on the currency front, the naira is down ~10% against the dollar, to 1580/$, since the last meeting.”
Omojomolo said these factors might encourage some caution from the CBN and for it to downplay the possible start of an easing cycle.
“That said, inflation has probably now peaked and the impact of last year’s fuel subsidy cuts and previous sharp falls in the naira will soon fade. We are sticking with our forecast for rate cuts to start early next year,” he added.
