As inflation continues to defy the Central Bank of Nigeria’s (CBN) tight monetary policy stance, analysts at Cowry Asset Management Limited have harped on the need for effective collaboration between the fiscal and monetary authorities if the country is to achieve its key objectives of economic stability and sustainable development.

Commenting on the out come of the recent meeting of the apex bank’s Monetary Policy Committee (MPC) meeting , the analysts, in their latest, “Cowry weekly financial markets review and outlook,” noted that the committee’s decision to increase the benchmark interest rate- Monetary Policy Rate (MPR) by 25 basis points to a historic high of 27.50 per cent, while leaving all monetary policy parameters unchanged, came amid unrelenting inflationary pressures as Nigeria’s headline inflation surged to a four-month peak of 33.88 per cent in October, up from 32.70 per cent in September.

The analysts said: “Throughout 2024, the MPC raised the policy rate by a cumulative 875 basis points from 18.75 per cent to 27.50 per cent.

This most recent 25 basis points hike signals a shift towards assessing the lagging effects of previous rate hikes as the committee appears keen to gauge the impact of tighter monetary conditions on inflation and economic growth while remaining vigilant to domestic and global economic developments.

“We think the decision reflects the MPC’s intent to curb aggregate demand without significantly dampening economic output; reinforce its credibility in maintaining price stability, narrow the negative real interest rate gap to encourage domestic savings and restore investor confidence; and taper economic and financial conditions to manage systemic liquidity effectively.”

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