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Business Incorporated: Focus On Monetary Policy Decision

Channels Television  
Updated August 1, 2014

Business incorporatedThe Monetary Policy Committee’s decision to leave the Monetary Policy Rate (MPR) at 12 per cent, is in accordance to the expectations of many analysts in the financial market. There were a number of factors that contributed to the retention of the MPR at 12 per cent.

According to the committee, of the factors is the rebound in global economic activity strengthened in the first half of 2014; although at levels lower than previously projected. The tapered growth arose mainly from the emerging and developing economies owing to the rising real interest rates and geo-political crisis.

The Committee noted that the stance of monetary policy could diverge across regions over the medium term on account of variations in risks and other challenges confronting various economies. The US is expected to commence tightening by the second half of 2015 as inflation hits the long run target and unemployment rate falls to the threshold level.

The euro area and Japan are expected to continue with supportive monetary policy due to low inflation including threat of deflation in some countries, weak recovery, weakness in bank balance sheets, and strong demand for their bonds as a result of low sovereign risk.

After deliberations, the committee decided to retain the MPR at 12 per cent with a corridor of +/-200 basis points around the midpoint. It also retained the Liquidity Ratio at 30 per cent, the public sector Cash Reserve Requirement at 75.0 per cent; and also retained the private sector Cash Reserve Requirement at 15.0 per cent.

Channels Television’s guest is Dr Ayo Teriba, an economist. He spoke to Bolaji Akinwale on the significance of the MPC decision to the Nigerian economy.