Nigeria rate cut more likely ahead of CBN November meeting – Businessday

Nigeria’s central bank monetary policy committee (MPC) is likely to reduce interest rates when it meets on November 21 and 22, barely two weeks away, according to analysts at consulting firm, Financial Derivatives Company (FDC) Ltd.
“With headline inflation slowing and an increasing need to spur growth brewing, the MPC is likely to adopt an accommodative stance in their upcoming meeting this November,” FDC anlaysts said in a note to BusinessDay, Nov. 9.
Stuck in a dilemma of whether to ease rates to spur economic activity or hike rates to curtail inflation, the CBN has often let the latter dictate the tune of its decision in its last two meetings.
However, month-on-month inflation has eased in the months after July, when the MPC hiked interest rates by 200 basis points to 14 percent from 12 percent.
Buoyed by slowing m/m inflation, analysts at FDC say the CBN will be under less pressure to keep rates high at their next meeting.
At its last meeting, the CBN expressed concerns about rising inflation, citing this as a reason for maintaining its contractive stance.
“Given that there is major clamour for lower interest rates and a stimulus package as antidotes to the recession, the reduced monthly inflation rate may sound like music to the ears of the doves in the committee.
Nigeria’s inflation rate has broken out of the required threshold this year, touching an 11-year high in September. October’s inflation report is slated for release by the National Bureau of Statistics (NBS) on November 17 according to the bureau’s data release calendar.
“Our Year-on-Year (YoY) headline inflation forecast for the month of October is estimated to increase marginally to 18.2% and we are also forecasting a month-on-month inflation rate of 0.67%, which if annualized is 8.38%, approximately 1.92% lower than the September’s level,” FDC analysts added.
FDC’s forecast of 18.2 percent represents a 0.3 percent increase from 17.9 in September and if correct would make October’s headline inflation the highest year/year inflation level in 11 years.
On the other hand, the forecast for month-on-month inflation in October would also mean inflation slowed to the lowest yet in 2016, lower than September’s 0.8 percent.
Nigeria’s inflation in 2016 is fuelled by cost shocks brought on by dollar shortages.