Economic analysts have said they expect the Monetary Policy Committee (MPC) to keep policy rates unchanged while reiterating resolve to keep yields at low levels in the near term to compel Deposit Money Banks (DMBs) to boost private sector credit.
The MPC is to hold its first meeting of the year today and tomorrow and it is expected that the Committee will assess the developments in the domestic and external macroeconomic and financial markets since its last meeting in November 2020 and provide guidance on the path of monetary policy in 2021.
In an email note sent to Daily Sun, Senior Research Analyst, Gbolahan Ologunro and Research analyst ,Abdulazeez Kuranga, both of Cordros Capital, said, the recent rise in new COVID-19 cases will be on the front burner of the Committee given the potential to unwind gains from fiscal and monetary stimulus since the reopening of the economy in May 2020.
They further added that they expect the MPC to reiterate its earlier view that inflationary pressures are driven by these supply-side factors which are outside the control of monetary policy due to the fact that inflationary pressure has intensified since the last MPC meeting in November (October 2020 Inflation: 14.23 per cent) with consumer prices rising to 15.75 per cent y/y as of December largely due to underwhelming harvest season, persistent security challenges, and poor distribution network.
‘Although rising inflationary pressures alongside fragilities in the balance of payments present a strong case for monetary tightening, we believe it is rather too early for such a stance given the need to support economic recovery.